exv10w73



 





EXECUTION COPY

Exhibit 10.73




AMENDED AND RESTATED CREDIT AGREEMENT




DATED AS OF JUNE 30, 2004




AMONG




ACTION PERFORMANCE COMPANIES, INC.,

ACTION RACING COLLECTABLES, INC.,

ACTION SPORTS IMAGE, L.L.C.,

FUNLINE MERCHANDISE COMPANY, INC.,

JEFF HAMILTON COLLECTION, INC.

MCARTHUR TOWEL AND SPORTS, INC.,

RACING COLLECTABLES CLUB OF AMERICA, INC.,

AND

TREVCO TRADING CORP.




AS BORROWERS,




THE LOAN PARTIES PARTY HERETO,




THE LENDERS PARTY HERETO FROM TIME TO TIME,




BANK ONE, NA (MAIN OFFICE CHICAGO),

AS AGENT AND LC ISSUER




AND




BANC ONE CAPITAL MARKETS, INC.,

AS LEAD ARRANGER AND SOLE BOOK RUNNER




 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	ARTICLE I DEFINITIONS	 	 	2	 
	ARTICLE II THE FACILITY	 	 	28	 
	2.1
	 	The Facility	 	 	28	 
	 
	2.1.1   Revolving Loans	 	 	28	 
	 
	2.1.2   Facility LCs	 	 	31	 
	 
	2.1.3   Non-Ratable Loans	 	 	36	 
	 
	2.1.4   Protective Advances and Overadvances	 	 	37	 
	 
	2.1.5   Term A Loans	 	 	38	 
	 
	2.1.6   Term B Loans	 	 	39	 
	2.2
	 	Ratable Loans; Risk Participation	 	 	39	 
	2.3
	 	Payment of the Obligations	 	 	40	 
	2.4
	 	Minimum Amount of Each Advance	 	 	40	 
	2.5
	 	Funding Account	 	 	40	 
	2.6
	 	Reliance Upon Authority; No Liability	 	 	40	 
	2.7
	 	Conversion and Continuation of Outstanding Advances	 	 	40	 
	2.8
	 	Telephonic Notices	 	 	41	 
	2.9
	 	Notification of Advances, Interest Rates and Repayments	 	 	41	 
	2.10
	 	Fees	 	 	41	 
	2.11
	 	Interest Rates	 	 	42	 
	2.12
	 	Eurodollar Advances Post Default; Default Rates	 	 	42	 
	2.13
	 	Interest Payment Dates; Interest and Fee Basis	 	 	43	 
	2.14
	 	Voluntary Prepayments	 	 	43	 
	2.15
	 	Mandatory Prepayments	 	 	43	 
	2.16
	 	Termination of the Facility	 	 	45	 
	2.17
	 	Method of Payment	 	 	46	 
	2.18
	 	Apportionment, Application, and Reversal of Payments	 	 	47	 
	2.19
	 	Settlement	 	 	48	 
	2.20
	 	Indemnity for Returned Payments	 	 	49	 
	2.21
	 	Noteless Agreement; Evidence of Indebtedness	 	 	49	 
	2.22
	 	Lending Installations	 	 	50	 
	2.23
	 	Non-Receipt of Funds by the Agent; Defaulting Lenders	 	 	50	 
	2.24
	 	Limitation of Interest	 	 	51	 
	2.25
	 	Borrower’s Reduction of Commitment	 	 	53	 
	ARTICLE III YIELD PROTECTION; TAXES	 	 	53	 
	3.1
	 	Yield Protection	 	 	53	 
	3.2
	 	Changes in Capital Adequacy Regulations	 	 	54	 
	3.3
	 	Availability of Types of Advances	 	 	54	 
	3.4
	 	Funding Indemnification	 	 	54	 
	3.5
	 	Taxes	 	 	55	 
	3.6
	 	Lender Statements; Survival of Indemnity	 	 	57	 
	3.7
	 	Replacement of Lender	 	 	57	 







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	ARTICLE IV CONDITIONS PRECEDENT	 	 	58	 
	4.1
	 	Effectiveness	 	 	58	 
	4.2
	 	Each Credit Extension	 	 	61	 
	ARTICLE V REPRESENTATIONS AND WARRANTIES	 	 	61	 
	5.1
	 	Existence and Standing	 	 	61	 
	5.2
	 	Authorization and Validity	 	 	62	 
	5.3
	 	No Conflict; Government Consent	 	 	62	 
	5.4
	 	Security Interest in Collateral	 	 	62	 
	5.5
	 	Financial Statements	 	 	62	 
	5.6
	 	Material Adverse Change	 	 	63	 
	5.7
	 	Taxes	 	 	63	 
	5.8
	 	Litigation and Contingent Obligations	 	 	63	 
	5.9
	 	Capitalization and Subsidiaries	 	 	63	 
	5.10
	 	ERISA	 	 	64	 
	5.11
	 	Accuracy of Information	 	 	64	 
	5.12
	 	Names; Prior Transactions	 	 	64	 
	5.13
	 	Regulation U	 	 	64	 
	5.14
	 	Material Agreements	 	 	64	 
	5.15
	 	Compliance With Laws	 	 	64	 
	5.16
	 	Ownership of Properties	 	 	65	 
	5.17
	 	Plan Assets; Prohibited Transactions	 	 	65	 
	5.18
	 	Environmental Matters	 	 	65	 
	5.19
	 	Investment Company Act	 	 	65	 
	5.20
	 	Public Utility Holding Company Act	 	 	65	 
	5.21
	 	Bank Accounts	 	 	65	 
	5.22
	 	Indebtedness	 	 	65	 
	5.23
	 	Affiliate Transactions	 	 	65	 
	5.24
	 	Real Property; Leases	 	 	66	 
	5.25
	 	Intellectual Property Rights	 	 	66	 
	5.26
	 	Insurance	 	 	66	 
	5.27
	 	Solvency	 	 	66	 
	5.28
	 	Subordinated Indebtedness	 	 	67	 
	5.29
	 	Post-Retirement Benefits	 	 	67	 
	5.30
	 	Common Enterprise	 	 	67	 
	5.31
	 	Reportable Transaction	 	 	67	 
	5.32
	 	Labor Disputes	 	 	67	 
	ARTICLE VI COVENANTS	 	 	68	 
	6.1
	 	Financial and Collateral Reporting	 	 	68	 
	6.2
	 	Use of Proceeds	 	 	71	 
	6.3
	 	Notices	 	 	71	 
	6.4
	 	Conduct of Business	 	 	73	 
	6.5
	 	Taxes	 	 	74	 
	6.6
	 	Payment of Indebtedness and Other Liabilities	 	 	74	 
	6.7
	 	Insurance	 	 	74	 







ii









 






	 	 	 	 	 	 	 
	6.8
	 	Compliance with Laws	 	 	76	 
	6.9
	 	Maintenance of Properties and Intellectual Property Rights	 	 	76	 
	6.10
	 	Inspection	 	 	76	 
	6.11
	 	Appraisals	 	 	77	 
	6.12
	 	Communications with Accountants	 	 	77	 
	6.13
	 	Collateral Access Agreements and Real Estate Purchases	 	 	77	 
	6.14
	 	Deposit Account Control Agreements	 	 	77	 
	6.15
	 	Additional Collateral; Further Assurances	 	 	77	 
	6.16
	 	Dividends	 	 	79	 
	6.17
	 	Indebtedness	 	 	79	 
	6.18
	 	Capital Structure	 	 	81	 
	6.19
	 	Merger	 	 	81	 
	6.20
	 	Sale of Assets	 	 	81	 
	6.21
	 	Investments and Acquisitions	 	 	81	 
	6.22
	 	Liens	 	 	82	 
	6.23
	 	Change of Name or Location; Change of Fiscal Year	 	 	84	 
	6.24
	 	Affiliate Transactions	 	 	84	 
	6.25
	 	Amendments to Agreements	 	 	84	 
	6.26
	 	Prepayment of Indebtedness; Subordinated Indebtedness	 	 	84	 
	6.27
	 	Financial Contracts	 	 	85	 
	6.28
	 	Capital Expenditures	 	 	85	 
	6.29
	 	Financial Covenants	 	 	85	 
	 
	6.29.1   Fixed Charge Coverage Ratio	 	 	85	 
	 
	6.29.2   Minimum Tangible Net Worth	 	 	85	 
	6.30
	 	Depository Banks	 	 	86	 
	6.31
	 	Sale of Accounts	 	 	86	 
	6.32
	 	Convertible Note Repurchase	 	 	86	 
	ARTICLE VII DEFAULTS	 	 	86	 
	ARTICLE VIII REMEDIES; WAIVERS AND AMENDMENTS	 	 	90	 
	8.1
	 	Remedies	 	 	90	 
	8.2
	 	Waivers by Loan Parties	 	 	91	 
	8.3
	 	Amendments	 	 	91	 
	8.4
	 	Preservation of Rights	 	 	93	 
	ARTICLE IX GENERAL PROVISIONS	 	 	94	 
	9.1
	 	Survival of Representations	 	 	94	 
	9.2
	 	Governmental Regulation	 	 	94	 
	9.3
	 	Headings	 	 	94	 
	9.4
	 	Entire Agreement	 	 	94	 
	9.5
	 	Several Obligations; Benefits of this Agreement	 	 	94	 
	9.6
	 	Expenses; Indemnification	 	 	94	 
	9.7
	 	Numbers of Documents	 	 	96	 
	9.8
	 	Accounting	 	 	97	 
	9.9
	 	Severability of Provisions	 	 	97	 
	9.10
	 	Nonliability of Lenders	 	 	97	 







iii









 






	 	 	 	 	 	 	 
	9.11
	 	Confidentiality	 	 	97	 
	9.12
	 	Nonreliance	 	 	98	 
	9.13
	 	Disclosure	 	 	98	 
	9.14
	 	Amendment and Restatement	 	 	99	 
	ARTICLE X THE AGENT	 	 	99	 
	10.1
	 	Appointment; Nature of Relationship	 	 	99	 
	10.2
	 	Powers	 	 	99	 
	10.3
	 	General Immunity	 	 	99	 
	10.4
	 	No Responsibility for Credit Extensions, Recitals, etc.	 	 	100	 
	10.5
	 	Action on Instructions of the Lenders	 	 	100	 
	10.6
	 	Employment of Agents and Counsel	 	 	100	 
	10.7
	 	Reliance on Documents; Counsel	 	 	100	 
	10.8
	 	Agent’s Reimbursement and Indemnification	 	 	101	 
	10.9
	 	Notice of Default	 	 	101	 
	10.10
	 	Rights as a Lender	 	 	101	 
	10.11
	 	Lender Credit Decision	 	 	102	 
	10.12
	 	Successor Agent	 	 	102	 
	10.13
	 	Delegation to Affiliates	 	 	103	 
	10.14
	 	Execution of Loan Documents	 	 	103	 
	10.15
	 	Collateral Matters	 	 	103	 
	10.16
	 	Co-Agents, Documentation Agent, Syndication Agent, etc.	 	 	105	 
	ARTICLE XI SETOFF; RATABLE PAYMENTS	 	 	105	 
	11.1
	 	Setoff	 	 	105	 
	11.2
	 	Ratable Payments	 	 	106	 
	ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS	 	 	106	 
	12.1
	 	Successors and Assigns	 	 	106	 
	12.2
	 	Participations	 	 	107	 
	12.3
	 	Assignments	 	 	107	 
	12.4
	 	Dissemination of Information	 	 	109	 
	12.5
	 	Tax Treatment	 	 	109	 
	12.6
	 	Assignment by LC Issuer	 	 	109	 
	ARTICLE XIII NOTICES	 	 	110	 
	13.1
	 	Notices; Effectiveness; Electronic Communications	 	 	110	 
	13.2
	 	Change of Address, Etc.	 	 	111	 
	ARTICLE XIV COUNTERPARTS	 	 	111	 
	ARTICLE XV GUARANTY	 	 	111	 
	15.1
	 	Guaranty	 	 	111	 
	15.2
	 	Guaranty of Payment	 	 	112	 
	15.3
	 	No Discharge or Diminishment of Guaranty	 	 	112	 
	15.4
	 	Defenses Waived	 	 	113	 
	15.5
	 	Rights of Subrogation	 	 	114	 







iv









 






	 	 	 	 	 	 	 
	15.6
	 	Reinstatement; Stay of Acceleration	 	 	114	 
	15.7
	 	Information	 	 	114	 
	15.8
	 	Termination	 	 	114	 
	15.9
	 	Taxes	 	 	114	 
	15.10
	 	Severability	 	 	115	 
	15.11
	 	Contribution	 	 	115	 
	15.12
	 	Lending Installations	 	 	116	 
	15.13
	 	Liability Cumulative	 	 	116	 
	ARTICLE XVI CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL	 	 	116	 
	16.1
	 	CHOICE OF LAW	 	 	116	 
	16.2
	 	CONSENT TO JURISDICTION	 	 	116	 
	16.3
	 	WAIVER OF JURY TRIAL	 	 	117	 
	ARTICLE XVII THE BORROWER REPRESENTATIVE	 	 	117	 
	17.1
	 	Appointment; Nature of Relationship	 	 	117	 
	17.2
	 	Powers	 	 	117	 
	17.3
	 	Employment of Agents	 	 	117	 
	17.4
	 	Notices	 	 	117	 
	17.5
	 	Successor Borrower Representative	 	 	117	 
	17.6
	 	Execution of Loan Documents; Aggregate Borrowing Base Certificate	 	 	118	 
	17.7
	 	Reporting	 	 	118	 
	EXHIBIT A BORROWING NOTICE	 	 	1	 
	EXHIBIT B CONVERSION/CONTINUATION NOTICE	 	 	1	 
	EXHIBIT C REVOLVING NOTE	 	 	1	 
	EXHIBIT C-2 TERM A NOTE	 	 	1	 
	EXHIBIT C-3 TERM B NOTE	 	 	1	 
	EXHIBIT D FORM OF OPINION	 	 	1	 
	EXHIBIT E COMPLIANCE CERTIFICATE	 	 	1	 
	 
	 	SCHEDULE I TO COMPLIANCE CERTIFICATE	 	 	1	 
	 
	 	SCHEDULE II TO COMPLIANCE CERTIFICATE	 	 	1	 
	 
	 	SCHEDULE III TO COMPLIANCE CERTIFICATE	 	 	1	 
	EXHIBIT F JOINDER AGREEMENT	 	 	1	 
	EXHIBIT G ASSIGNMENT AND ASSUMPTION AGREEMENT	 	 	1	 
	EXHIBIT H BORROWING BASE CERTIFICATE	 	 	1	 
	EXHIBIT I AGGREGATE BORROWING BASE CERTIFICATE	 	 	1	 







v









 






	 	 	 	 	 	 	 
	EXHIBIT J FORM OF TOTAL INSTRUMENT INCREASE CERTIFICATE	 	 	1	 
	EXHIBIT K FORM OF ADDITIONAL LENDER CERTIFICATE	 	 	1	 
	 
	 	SCHEDULE 5.8  LITIGATION AND CONTINGENT OBLIGATIONS	 	 	1	 
	 
	 	SCHEDULE 5.9  CAPITALIZATION AND SUBSIDIARIES	 	 	1	 
	 
	 	SCHEDULE 5.12  NAMES; PRIOR TRANSACTIONS	 	 	1	 
	 
	 	SCHEDULE 5.14  MATERIAL AGREEMENTS	 	 	1	 
	 
	 	SCHEDULE 5.16  OWNERSHIP OF PROPERTIES	 	 	1	 
	 
	 	SCHEDULE 5.22  INDEBTEDNESS	 	 	1	 
	 
	 	SCHEDULE 5.23  AFFILIATE TRANSACTIONS	 	 	1	 
	 
	 	SCHEDULE 5.24  REAL PROPERTY; LEASES	 	 	1	 
	 
	 	SCHEDULE 5.25  INTELLECTUAL PROPERTY RIGHTS	 	 	1	 
	 
	 	SCHEDULE 5.26  INSURANCE	 	 	1	 
	 
	 	SCHEDULE 5.32  LABOR MATTERS	 	 	1	 
	 
	 	SCHEDULE 6.3(P)  MATERIAL LICENSES	 	 	1	 
	 
	 	SCHEDULE 6.21  OTHER INVESTMENTS	 	 	1	 
	 
	 	SCHEDULE 6.22  LIENS	 	 	1	 








vi









 





AMENEDED AND RESTATED

CREDIT AGREEMENT




     This Amended and Restated Credit Agreement, dated as of June 30, 2004, is
among Action Performance Companies, Inc., an Arizona corporation (“APC” or
“Company”), Action Racing Collectables, Inc., an Arizona corporation (“ARC”),
Action Sports Image, L.L.C., an Arizona limited liability company (“ASI”),
Funline Merchandise Company, Inc., a California corporation (“Funline”), Jeff
Hamilton Collection, Inc., an Arizona corporation (“Hamilton”), McArthur Towel
and Sports, Inc., an Arizona corporation (“McArthur”), Racing Collectables Club
of America, Inc., an Arizona corporation (“RCCA”)and Trevco Trading Corp., an
Arizona corporation (“Trevco”), each as a Borrower, the other Loan Parties, the
Lenders and Bank One, NA, a national banking association with its main office
in Chicago, Illinois, as an LC Issuer and as the Agent.



RECITALS




     WHEREAS, previous hereto, the Company, the other Borrowers, certain
lenders, certain guarantors, and Bank One, NA, as agent entered into the
Original Loan Agreement (as defined herein), which Original Loan Agreement has
since been amended, modified, extended, renewed and restructured from time to
time;



     WHEREAS, the Borrowers have requested that the lenders amend, restate,
modify, extend, renew and restructure the loans made pursuant to the Original
Loan Agreement to admit additional Persons as borrowers, guarantors and
lenders, as the case may be, and make available to the Borrowers loans and
other extensions of credit, on the terms and conditions set forth herein in an
aggregate original principal amount not to exceed $75,000,000 as of the Closing
Date (subject to a potential increase of up to $20,000,000 as further set forth
herein), which extensions of credit will be used by the Borrowers for the
purposes set forth in Section 6.2;



     WHEREAS, the Borrowers and the other Loan Parties have agreed to secure
all of their obligations under the Loan Documents by granting to the Agent, on
behalf of the Lenders, a security interest in and lien upon the Collateral as
set forth in the Collateral Documents; and



     WHEREAS, the Guarantors have agreed to guarantee all of the Obligations of
the Borrowers under the Loan Documents to the Agent and the Lenders as set
forth in the Guaranty;



     NOW THEREFORE, in consideration of these premises and the terms and
conditions set forth in this Agreement, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
do hereby amend and completely restate the Original Loan Agreement, effective
as of the Closing Date (as defined below), and do hereby agree as follows:



1









 





ARTICLE I




DEFINITIONS




     As used in this Agreement:



     “Account” shall have the meaning given to such term in the Security
Agreement.



     “Account Debtor” means any Person obligated on an Account.



     “Acquisition” means any transaction, or any series of related
transactions, consummated on or after the Closing Date, by which any Loan Party
(a) acquires any going business or all or substantially all of the assets of
any Person, whether through purchase of assets, merger or otherwise or (b)
directly or indirectly acquires (in one transaction or as the most recent
transaction in a series of transactions) at least a majority (in number of
votes) of the Capital Stock of a Person which has ordinary voting power for the
election of directors or other similar management personnel of a Person (other
than Capital Stock having such power only by reason of the happening of a
contingency) or a majority of the outstanding Capital Stock of a Person.



     “Advance” means a borrowing hereunder, (a) made by some or all of the
Lenders on the same Borrowing Date, or (b) converted or continued by the
Lenders on the same date of conversion or continuation, consisting, in either
case, of the aggregate amount of the several Loans of the same Type and, in the
case of Eurodollar Loans, for the same Interest Period. The term Advance shall
include Non-Ratable Loans, Overadvances and Protective Advances unless
otherwise expressly provided.



     “Affected Lender” is defined in Section 3.7.



     “Affiliate” of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 15% or
more of any class of the voting Capital Stock of the controlled Person or
possesses, directly or indirectly, the power to direct or cause the direction
of the management or policies of the controlled Person, whether through
ownership of Capital Stock, by contract or otherwise.



     “Agent” means Bank One in its capacity as contractual representative of
the Lenders pursuant to Article X, and not in its individual capacity as a
Lender, and any successor Agent appointed pursuant to Article X.



     “Aggregate Borrowing Base” means the aggregate of the Borrowing Bases of
all of the Borrowers.



     “Aggregate Borrowing Base Certificate” means a certificate signed by an
Authorized Person of the Borrower Representative in the form of Exhibit I or
another form which is acceptable to the Agent in its sole discretion.



     “Aggregate Commitment” means the aggregate of the Commitments of all the
Lenders, as reduced from time to time pursuant to the terms hereof, which
Aggregate Commitment shall



2









 




on the Closing Date be in the amount of $75,000,000, which may be
subsequently increased pursuant to the terms and conditions set forth herein,
by an amount not to exceed $20,000,000 as a result of the occurrence of a
Revolving Commitment Adjustment Event.




     “Aggregate Credit Exposure” means, at any time, the aggregate of the
Credit Exposure of all the Lenders.



     “Aggregate Revolving Exposure” means, at any time, the aggregate Revolving
Exposure of all the Lenders.



     “Agreement” means this Amended and Restated Credit Agreement, as it may be
amended or modified and in effect from time to time.



     “Alternate Base Rate” means, for any day, a rate of interest per annum
equal to the higher of (a) the Prime Rate for such day and (b) the sum of the
Federal Funds Effective Rate for such day plus 1/2% per annum.



     “Applicable Fee Rate” means, at any time, the percentage rate per annum at
which fees accrue on Available Revolving Commitment at such time as set forth
in the Pricing Schedule.



     “Applicable Margin” means, with respect to Advances of any Type at any
time, the percentage rate per annum which is applicable at such time with
respect to Advances of such Type as set forth in the Pricing Schedule.



     “Approved Fund” means any Fund that is administered or managed by (a) a
Lender, (b) an Affiliate of a Lender or (c) an entity or an Affiliate of an
entity that administers or manages a Lender.



     “Arranger” means Banc One Capital Markets, Inc., a Delaware corporation,
and its successors, in its capacity as Lead Arranger and Sole Book Runner.



     “Article” means an article of this Agreement unless another document is
specifically referenced.



     “Assignment Agreement” is defined in Section 12.3(a).



     “Authorized Person” means any of David Martin, Stephanie Caldwell or any
other Person from time to time so authorized by Borrower Representative in a
writing signed by the Chief Financial Officer of Borrower Representative.



     “Availability” means, with respect to all of the Borrowers, at any time,
an amount equal to the lesser of (a) the Revolving Commitment and (b) the
Aggregate Borrowing Base, in each case, minus the Aggregate Revolving Exposure.



     “Available Revolving Commitment” means, at any time, the Revolving
Commitment then in effect minus the Aggregate Revolving Exposure at such time.



3









 





     “Bank One” means Bank One, NA, a national banking association, with its
main office in Chicago, Illinois, in its individual capacity, and its
successors.



     “Banking Services” means each and any of the following bank services
provided to any Loan Party by Bank One or any of its Affiliates: (a)
commercial credit cards, (b) stored value cards and (c) treasury management
services (including, without limitation, controlled disbursement, automated
clearinghouse transactions, return items, overdrafts and interstate depository
network services).



     “Banking Services Obligations” of the Loan Parties means any and all
obligations of the Loan Parties, whether absolute or contingent and howsoever
and whensoever created, arising, evidenced or acquired (including all renewals,
extensions and modifications thereof and substitutions therefor) in connection
with Banking Services.



     “Banking Services Reserves” means all Reserves which the Agent from time
to time establishes in its Permitted Discretion for Banking Services then
provided or outstanding.



     “Bankruptcy Code” means Title 11 of the U.S. Code (11 U.S.C. § 101 et
seq.) as amended, reformed, or otherwise modified from time to time, and any
rule or regulation issued thereunder.



     “Borrower” or “Borrowers” means, individually or collectively, the
Company, ARC, ASI, Funline, Hamilton, McArthur, RCCA and Trevco and their
respective successors and assigns.



     “Borrower Representative” means the Company, in its capacity as
contractual representative of the Borrowers pursuant to Article XVII.



     “Borrowing Base” means, at any time, with respect to each Borrower, the
sum of (a) 100% of Eligible Cash Collateral, (b) 85% of such Borrower’s
Eligible Accounts at such time, plus (c) 50% of such Borrower’s Eligible
Inventory, valued at the lower of cost or market value, determined on a
first-in-first-out basis or average cost basis, at such time, minus (d) the
amounts outstanding under the Convertible Notes and the Indenture, minus (e)
Reserves related to such Borrower. After the occurrence and during the
continuation of an Unmatured Default or Default, the Agent may, in its
Permitted Discretion, reduce the advance rates set forth above or reduce one or
more of the other elements used in computing the Borrowing Base.



     “Borrowing Base Certificate” means a certificate, signed by an Authorized
Person of a Borrower, in the form of Exhibit H or another form which is
acceptable to the Agent in its sole discretion.



     “Borrowing Date” means a date on which an Advance or a Loan is made
hereunder.



     “Borrowing Notice” is defined in Section 2.1.1(b).



     “Business Day” means (a) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York City for the conduct of
substantially all of their commercial



4









 




lending activities, interbank wire transfers can be made on the Fedwire
system and dealings in U.S. dollars are carried on in the London interbank
market and (b) for all other purposes, a day (other than a Saturday or Sunday)
on which banks generally are open in Chicago for the conduct of substantially
all of their commercial lending activities and interbank wire transfers can be
made on the Fedwire system.




     “Capital Expenditures” means, without duplication, any expenditure or
commitment to expend money for any purchase or other acquisition of any asset
which would be classified as a fixed or capital asset on a consolidated balance
sheet of the Company and its Subsidiaries prepared in accordance with GAAP.



     “Capital Stock” means any and all corporate stock, units, shares,
partnership interests, membership interests, equity interests, rights,
securities, or other equivalent evidences of ownership (howsoever designated)
issued by any Person.



     “Capitalized Lease” of a Person means any lease of Property by such Person
as lessee which would be capitalized on a balance sheet of such Person prepared
in accordance with GAAP.



     “Capitalized Lease Obligations” of a Person means the aggregate amount of
the obligations of such Person under Capitalized Leases which would be shown as
a liability on a balance sheet of such Person prepared in accordance with GAAP.



     “Cash Equivalent Investments” means (a) short-term obligations of, or
fully guaranteed by, the U.S., (b) commercial paper rated A-1 or better by S&P
or P-1 or better by Moody’s, (c) demand deposit accounts maintained in the
ordinary course of business with any domestic office of any commercial bank
organized under the laws of the U.S. or any State thereof that has a combined
capital and surplus and undivided profits of not less than $500,000,000, and
(d) certificates of deposit issued by and time deposits with any domestic
office of any commercial bank organized under the laws of the U.S. or any State
thereof that has a combined capital and surplus and undivided profits of not
less than $500,000,000; provided that, in each case, the same provides for
payment of both principal and interest (and not principal alone or interest
alone) and is not subject to any contingency regarding the payment of principal
or interest.



     “Change in Control” means (a) the acquisition by any Person, or two or
more Persons acting in concert, of beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934) of 25% or more of the outstanding voting Capital Stock of
the Company; or (b) the Company shall cease to own, free and clear of all Liens
or other encumbrances, at least 80% of the outstanding voting Capital Stock of
the other Borrowers on a fully diluted basis.



     “Closing Date” means the date of this Agreement.



     “Code” means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time, and any rule or regulation issued
thereunder.



     “Collateral” means any and all Property covered by the Collateral
Documents and any and all other Property of any Loan Party, now existing or
hereafter acquired, that may at any



5









 




time be or become subject to a security interest or Lien in favor of the
Agent, on behalf of itself and the Lenders, to secure the Secured Obligations.




     “Collateral Access Agreement” means any landlord waiver or other
agreement, in form and substance satisfactory to the Agent, between the Agent
and any third party (including any bailee, consignee, customs broker, or other
similar Person) in possession of any Collateral or any landlord of any Loan
Party for any real Property where any Collateral is located, as such landlord
waiver or other agreement may be amended, restated, or otherwise modified from
time to time.



     “Collateral Documents” means, collectively, the Security Agreement and any
other documents granting a Lien upon the Collateral as security for payment of
the Secured Obligations.



     “Collateral Shortfall Amount” is defined in Section 2.1.2(l).



     “Commercial LC Fee” is defined in Section 2.10(b).



     “Commitment” means, for each Lender, the obligation of such Lender to make
Loans to the Borrowers, and participate in Facility LCs issued upon the
application of any Borrower, in an aggregate amount not exceeding the amount
set forth in the Commitment Schedule or as set forth in any Assignment
Agreement that has become effective pursuant to Section 12.3(c), as such amount
may be increased, subject to the terms and conditions set forth herein, as a
result of a Revolving Commitment Adjustment Event or otherwise modified from
time to time pursuant to the terms hereof.



     “Commitment Schedule” means the Schedule attached hereto identified as
such.



     “Company” means Action Performance Companies, Inc., an Arizona corporation
and its successors and assigns.



     “Compliance Certificate” is defined in Section 6.1(e).



     “Consolidated Capital Expenditures” means, with reference to any period,
the Capital Expenditures of the Company and its Subsidiaries calculated on a
consolidated basis for such period.



     “Consolidated EBITDA” means Consolidated Net Income plus, to the extent
deducted from revenues in determining Consolidated Net Income, (a) Consolidated
Interest Expense, (b) expense for taxes paid or accrued, net of tax refunds,
(c) depreciation, (d) amortization and other non-cash charges and (e)
extraordinary losses (as determined in accordance with GAAP) incurred other
than in the ordinary course of business, minus, to the extent included in
Consolidated Net Income, extraordinary gains (as determined in accordance with
GAAP) realized other than in the ordinary course of business, all calculated
for the Company and its Subsidiaries on a consolidated basis.



     “Consolidated Fixed Charges” means, with reference to any period, without
duplication, cash Consolidated Interest Expense, plus scheduled principal
payments on Indebtedness made during such period (excluding mandatory
prepayments based upon Excess Cash Flow in



6









 




accordance with Section 2.15(d)), plus expense for federal income taxes
paid in cash, plus dividends or distributions paid in cash (excluding dividends
paid by a non-Wholly-Owned Subsidiary of any Loan Party to holders of Capital
Stock that are not Loan Parties), plus Capitalized Lease payments, plus cash
contributions to any Plan, all calculated for the Company and its Subsidiaries
on a consolidated basis.




     “Consolidated Interest Expense” means, with reference to any period, the
interest expense of the Company and its Subsidiaries calculated on a
consolidated basis for such period.



     “Consolidated Net Income” means, with reference to any period, the net
income (or loss) of the Company and its Subsidiaries calculated on a
consolidated basis for such period.



     “Consolidated Net Worth” means at any time the consolidated stockholders’
equity of the Company and its Subsidiaries calculated on a consolidated basis
as of such time.



     “Consolidated Tangible Net Worth” means Consolidated Net Worth, minus
Intangibles.



     “Contingent Obligation” of a Person means any agreement, undertaking or
arrangement by which such Person assumes, guarantees, endorses, contingently
agrees to purchase or provide funds for the payment of, or otherwise becomes or
is contingently liable upon, the obligation or liability of any other Person,
or agrees to maintain the net worth or working capital or other financial
condition of any other Person, or otherwise assures any creditor of such other
Person against loss, including, without limitation, any comfort letter,
operating agreement, take or pay contract or the obligations of any such Person
as general partner of a partnership with respect to the liabilities of the
partnership.



     “Controlled Group” means all members of a controlled group of corporations
or other business entities and all trades or businesses (whether or not
incorporated) under common control which, together with the Company or any of
its Subsidiaries, are treated as a single employer under Section 414 of the
Code.



     “Conversion/Continuation Notice” is defined in Section 2.7.



     “Convertible Note Repurchase” means the repurchase by the Company of all
the outstanding Convertible Notes and the termination of the Indenture.



     “Convertible Notes” means those certain 4-3/4% Convertible Subordinated
Notes of the Company issued pursuant to the Indenture, due April 1, 2005.



     “Copyrights” shall have the meaning given to such term in the Security
Agreement.



     “Credit Exposure” means, as to any Lender at any time, the sum of (a) such
Lender’s Revolving Exposure at such time, plus (b) an amount equal to the
aggregate principal amount of its Term Loans outstanding at such time, plus (c)
an amount equal to its Pro Rata Share, if any, of the aggregate principal
amount of Protective Advances outstanding at such time.



     “Credit Extension” means the making of an Advance or the issuance of a
Facility LC hereunder.



7









 





     “Credit Extension Date” means the Borrowing Date for an Advance or the
issuance date for a Facility LC.



     “Current Assets” means, at any time, the total assets of the Loan Parties
which would be shown as current assets on a balance sheet of the Loan Parties
prepared in accordance with GAAP.



     “Current Liabilities” means, at any time, the total liabilities of the
Loan Parties which would be shown as current liabilities on a balance sheet of
the Loan Parties prepared in accordance with GAAP.



     “Customer List” means a list of a Borrower’s customers, specifying each
customer’s name, mailing address and phone number.



     “Default” means an event described in Article VII.



     “Defaulting Lender” is defined in Section 2.23(b).



     “Deposit Account Control Agreement” means an agreement, in form and
substance satisfactory to the Agent, among any Loan Party, a banking
institution holding such Loan Party’s funds, and the Agent with respect to
collection and control of all deposits and balances held in a deposit account
maintained by any Loan Party with such banking institution.



     “Document” shall have the meaning given to such term in the Security
Agreement.



     “Dollars” or “$” means lawful currency of the United States of America.



     “Domestic Subsidiary” means any Subsidiary which is organized under the
laws of the U.S. or any state of the U.S.



     “Effective Date” means the date that the conditions precedent set forth in
Article IV are satisfied.



     “Eligible Accounts” means, at any time, the Accounts of a Borrower which
the Agent determines in its Permitted Discretion are eligible as the basis for
Credit Extensions hereunder. Without limiting the Agent’s discretion provided
herein, Eligible Accounts shall not include any Account:




                    (a) which is not subject to a first priority perfected
security interest in favor of the Agent;




                    (b) which is subject to any Lien other than (i) a Lien in
favor of the Agent and (ii) a Permitted Lien which does not have
priority over the Lien in favor of the Agent;




                    (c) with respect to which more than 90 days have elapsed since
the date of the original invoice therefor (other than Accounts
owing by Academy Corp., Autozone, Bass Proshop, Kmart, Meijer, Pep
Boys, Target, Wal-Mart and



8









 






any other Account Debtor so designated by Agent in its
Permitted Discretion with respect to which not more than 120 days
have elapsed since the date of the original invoice therefor);




                    (d) which is owing by an Account Debtor for which more than
50% of the Accounts owing from such Account Debtor and its
Affiliates are ineligible hereunder;




                    (e) which is owing by an Account Debtor to the extent the
aggregate amount of Accounts owing from such Account Debtor and its
Affiliates to all Borrowers exceeds 25% of the aggregate amount of
Eligible Accounts of all Borrowers;




                    (f) with respect to which any covenant, representation, or
warranty contained in this Agreement or in the Security Agreement
has been breached or is not true;




                    (g) which (i) does not arise from the sale of goods or
performance of services in the ordinary course of business, (ii) is
not evidenced by an invoice or other documentation satisfactory to
the Agent which has been sent to the Account Debtor, (iii)
represents a progress billing, (iv) is contingent upon such
Borrower’s completion of any further performance, or (v) represents
a sale on a bill-and-hold, guaranteed sale, sale-and-return, sale
on approval, consignment, cash-on-delivery or any other repurchase
or return basis;




                    (h) for which the goods giving rise to such Account have not
been shipped to the Account Debtor or for which the services giving
rise to such Account have not been performed by such Borrower;




                    (i) with respect to which any check or other instrument of
payment has been returned uncollected for any reason;




                    (j) which is owed by an Account Debtor which has (i) applied
for, suffered, or consented to the appointment of any receiver,
custodian, trustee, or liquidator of its assets, (ii) has had
possession of all or a material part of its property taken by any
receiver, custodian, trustee or liquidator, (iii) filed, or had
filed against it, any request or petition for liquidation,
reorganization, arrangement, adjustment of debts, adjudication as
bankrupt, winding-up, or voluntary or involuntary case under any
state or federal bankruptcy laws, (iv) has admitted in writing its
inability, or is generally unable to, pay its debts as they become
due, (v) become insolvent, or (vi) ceased operation of its
business;




                    (k) which is owed by any Account Debtor which has sold all or
a substantially all of its assets;




                    (l) which is owed by an Account Debtor which (i) does not
maintain its chief executive office in the U.S. or Canada (other
than the Province of Newfoundland) or (ii) is not organized under
applicable law of the U.S., any state



9









 






of the U.S., Canada, or any province of Canada (other than the
Province of Newfoundland) unless, in either case, such Account is
backed by a Letter of Credit acceptable to the Agent which is in
the possession of the Agent or the payment of which is insured by
an insurer organized under the laws of the U.S. and acceptable to
Agent pursuant to an insurance policy acceptable to Agent that is
assigned to Agent in a manner satisfactory to Agent;




                    (m) which is owed in any currency other than U.S. dollars;




                    (n) which is owed by (i) the government (or any department,
agency, public corporation, or instrumentality thereof) of any
country other than the U.S. unless such Account is backed by a
Letter of Credit acceptable to the Agent which is in the possession
of the Agent, or (ii) the government of the U.S., or any
department, agency, public corporation, or instrumentality thereof,
unless the Federal Assignment of Claims Act of 1940, as amended (31
U.S.C. § 3727 et seq. and 41 U.S.C. § 15 et seq.), and any other
steps necessary to perfect the Lien of the Agent in such Account
have been complied with to the Agent’s satisfaction;




                    (o) which is owed by any Affiliate, employee, or director of
any Loan Party;




                    (p) which, for any Account Debtor, exceeds a credit limit
determined by the Agent, to the extent of such excess;




                    (q) which is owed by an Account Debtor or any Affiliate of
such Account Debtor to which any Loan Party is indebted, but only
to the extent of such indebtedness;




                    (r) which is subject to any counterclaim, deduction, defense,
setoff or dispute but only to the extent of any such counterclaim,
deduction, defense, setoff or dispute;




                    (s) which is evidenced by any promissory note, chattel paper,
or instrument;




                    (t) which is owed by an Account Debtor located in any
jurisdiction which requires filing of a “Notice of Business
Activities Report” or other similar report in order to permit such
Borrower to seek judicial enforcement in such jurisdiction of
payment of such Account, unless such Borrower has filed such report
or qualified to do business in such jurisdiction;




                    (u) with respect to which such Borrower has made any agreement
with the Account Debtor for any reduction thereof, other than
discounts and adjustments given in the ordinary course of business;
or




                    (v) which the Agent determines may not be paid by reason of
the Account Debtor’s inability to pay or which the Agent otherwise
determines is unacceptable for any reason whatsoever.



10









 




In the event that an Account which was previously an Eligible Account ceases to
be an Eligible Account hereunder, such Borrower or the Borrower Representative
shall notify the Agent thereof (i) within three Business Days of the earlier of
the date such Borrower or the Borrower Representative has obtained knowledge
thereof if any such Account is in excess of $1,000,000 in the aggregate and
(ii) on and at the time of submission by the Borrower Representative to the
Agent of the next Aggregate Borrowing Base Certificate in all other cases.




     “Eligible Cash Collateral” means Dollars on deposit in the Permitted
Accounts and reflected in the most recent Borrowing Base Certificate delivered
by Borrowers to Agent on which Agent, on behalf of itself and Lenders, has a
valid enforceable first priority perfected Lien and security interest;
provided, however, that Eligible Cash Collateral shall not include any portion
of the foregoing (a) to the extent that any defense, counterclaim, setoff or
dispute is asserted with respect thereto; (b) that (i) is not owned by the
Borrowers or (ii) is subject to any Lien of any Person, other than Liens in
favor of Agent, on behalf of itself and Lenders; or (c) as to which any of the
representations or warranties in the Loan Documents are untrue.



     “Eligible Equipment” means, at any time, the Equipment of a Borrower which
the Agent determines in its Permitted Discretion is eligible as the basis for
Credit Extensions hereunder.



     “Eligible Inventory” means, at any time, the Inventory of a Borrower which
the Agent determines in its Permitted Discretion is eligible as the basis for
Credit Extensions hereunder. Without limiting the Agent’s discretion provided
herein, Eligible Inventory shall not include any Inventory:




                    (a) which is not subject to a first priority perfected Lien in
favor of the Agent;




                    (b) which is subject to any Lien other than (i) a Lien in
favor of the Agent and (ii) a Permitted Lien which does not have
priority over the Lien in favor of the Agent;




                    (c) which is, in the Agent’s opinion, slow moving, obsolete,
unmerchantable, defective, unfit for sale, not salable at prices
approximating at least the cost of such Inventory in the ordinary
course of business or unacceptable due to age, type, category
and/or quantity;




                    (d) with respect to which any covenant, representation, or
warranty contained in this Agreement or the Security Agreement has
been breached or is not true;




                    (e) which does not conform to all standards imposed by any
governmental authority;




                    (f) which is not finished goods to be sold by such Borrower in
the ordinary course of business or raw materials used or consumed
by such Borrower in the ordinary course of business in the
manufacture or production of other inventory which constitutes
work-in-process, spare or replacement parts, subassemblies,
packaging and shipping material, manufacturing supplies, display



11









 






items, bill-and-hold goods, returned or repossessed goods,
defective goods, goods held on consignment, or goods which are not
of a type held for sale in the ordinary course of business;




                    (g) which is not located in the U.S. or is in transit with a
common carrier from vendors and suppliers;




                    (h) which is located in any location leased by such Borrower
unless the lessor has delivered to the Agent a Collateral Access
Agreement;




                    (i) which is located in any third party warehouse or is in the
possession of a bailee and is not evidenced by a Document, unless
such warehouseman or bailee has delivered to the Agent a Collateral
Access Agreement and such other documentation as the Agent may
require;




                    (j) which is the subject of a consignment by such Borrower as
consignor;




                    (k) which is perishable;




                    (l) which contains or bears any Intellectual Property Rights
licensed to such Borrower unless (i) the Agent is satisfied that it
may sell or otherwise dispose of such Inventory without (A)
infringing the rights of such licensor, (B) violating any contract
with such licensor, or (C) incurring any liability with respect to
payment of royalties other than royalties incurred pursuant to sale
of such Inventory under the current licensing agreement and (ii)
without limiting the foregoing, at any time that Availability is
less than $10,000,000, if such Intellectual Property Rights are the
subject of a Material License, Agent shall have received such
additional documents, instruments and other evidence as Agent shall
in its Permitted Discretion shall require of the matters described
in clause (i) above, including without limitation (if requested by
Agent) an agreement executed by the licensor thereof and in form
and substance satisfactory to Agent confirming the matters
described in clause (i) above;




                    (m) which is not reflected in a current perpetual inventory
report of such Borrower; or




                    (n) which the Agent otherwise determines is unacceptable for
any reason whatsoever.


In the event that Inventory which was previously Eligible Inventory ceases to
be Eligible Inventory hereunder, such Borrower or the Borrower Representative
shall notify the Agent thereof (i) within three Business Days of the earlier of
the date the Borrower or the Borrower Representative has obtained knowledge
thereof if any such Inventory has a value (based on the lower of cost,
determined on a first-in, first-out basis, or market) in excess of $1,000,000
in the aggregate and (ii) on and at the time of submission by the Borrower
Representative to the Agent of the next Aggregate Borrowing Base Certificate in
all other cases.




12









 








     “Environmental Laws” means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, permits, concessions, grants, franchises,
licenses, agreements and other governmental restrictions relating to (a) the
protection of the environment, (b) the effect of the environment on human
health, (c) emissions, discharges or releases of pollutants, contaminants,
hazardous substances or wastes into surface water, ground water or land, or (d)
the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, hazardous substances or
wastes or the clean-up or other remediation thereof.



     “Equipment” has the meaning specified in the Security Agreement.



     “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.



     “Eurodollar Advance” means an Advance which, except as otherwise provided
in Section 2.12, bears interest at the applicable Eurodollar Rate.



     “Eurodollar Base Rate” means, with respect to a Eurodollar Advance for the
relevant Interest Period, the applicable British Bankers’ Association LIBOR
rate for deposits in U.S. dollars as reported by any generally recognized
financial information service as of 11:00 a.m. (London time) two Business Days
prior to the first day of such Interest Period, and having a maturity equal to
such Interest Period, provided that, if no such British Bankers’ Association
LIBOR rate is available to the Agent, the applicable Eurodollar Base Rate for
the relevant Interest Period shall instead be the rate determined by the Agent
to be the rate at which Bank One or one of its Affiliate banks offers to place
deposits in U.S. dollars with first-class banks in the interbank market at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period, in the approximate amount of Bank One’s relevant
Eurodollar Loan and having a maturity equal to such Interest Period.



     “Eurodollar Loan” means a Loan which, except as otherwise provided in
Section 2.12, bears interest at the applicable Eurodollar Rate.



     “Eurodollar Rate” means, with respect to a Eurodollar Advance for the
relevant Interest Period, the sum of (a) the quotient of (i) the Eurodollar
Base Rate applicable to such Interest Period, divided by (ii) one minus the
Reserve Requirement (expressed as a decimal) applicable to such Interest
Period, plus (b) the Applicable Margin.



     “Excess Cash Flow” means, without duplication, with respect to any Fiscal
Year of the Company and its Subsidiaries, the lesser of (a) $3,000,000 and (b)
Consolidated EBITDA minus Consolidated Interest Expense, minus federal income
taxes paid in cash, minus the sum of (i) Consolidated Capital Expenditures,
(ii) scheduled principal payments on Indebtedness made during such Fiscal Year
(excluding mandatory prepayments based upon Excess Cash Flow in accordance with
Section 2.15(d)), (iii) dividends or distributions paid in cash, (iv)
Capitalized Lease payments, (v) cash contributions to any Plan and (vi) the
increase (if any) of the difference between (A) the Loan Parties’ Current
Assets minus Current Liabilities measured as of the Last Business Day of such
Fiscal Year and (B) the difference between the Loan Parties’ Current



13









 




Assets and Current Liabilities measured as of the last Business Day of the
immediately preceding Fiscal Year.




     “Excluded Taxes” means, in the case of each Lender or applicable Lending
Installation and the Agent, taxes imposed on its overall revenue or net income,
and franchise taxes imposed on it, by (a) the jurisdiction under the laws of
which such Lender or the Agent is incorporated or organized or (b) the
jurisdiction in which the Agent’s or such Lender’s principal executive office
or such Lender’s applicable Lending Installation is located.



     “Exhibit” refers to an exhibit to this Agreement, unless another document
is specifically referenced.



     “Facility” means the credit facility described in Section 2.1 hereof to be
provided to the Borrowers on the terms and conditions set forth in this
Agreement.



     “Facility LC” is defined in Section 2.1.2(a).



     “Facility LC Application” is defined in Section 2.1.2(c).



     “Facility LC Collateral Account” is defined in Section 2.1.2(j).



     “Facility Termination Date” means the Revolver Termination Date or any
earlier date on which the Aggregate Commitment is reduced to zero or otherwise
terminated pursuant to the terms hereof.



     “Federal Funds Effective Rate” means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10:00
a.m. (Chicago time) on such day on such transactions received by the Agent from
three Federal funds brokers of recognized standing selected by the Agent in its
sole discretion.



     “Fee Letter” is defined in Section 2.10(c).



     “Financial Contract” of a Person means (a) any exchange-traded or
over-the-counter futures, forward, swap or option contract or other financial
instrument with similar characteristics, or (b) any Rate Management
Transaction.



     “Fiscal Month” means any of the monthly accounting periods of the Company.



     “Fiscal Quarter” means any of the quarterly accounting periods of the
Company, ending on December 31, March 31, June 30 and September 30 of each
year.



     “Fiscal Year” means any of the annual accounting periods of the Company
ending on September 30 of each year.



14









 





     “Fixed Charge Coverage Ratio” means, the ratio, determined as of the end
of each Fiscal Quarter of the Company for the then most-recently ended four
Fiscal Quarters, of (a) Consolidated EBITDA minus the unfinanced portion of
Consolidated Capital Expenditures to (b) Consolidated Fixed Charges, all
calculated for the Company and its Subsidiaries on a consolidated basis.



     “Fixtures” has the meaning specified in the Security Agreement.



     “Floating Rate” means, for any day, a rate per annum equal to (a) the
Alternate Base Rate for such day plus (b) the Applicable Margin, in each case
changing when and as the Alternate Base Rate changes.



     “Floating Rate Advance” means an Advance which, except as otherwise
provided in Section 2.12, bears interest at the Floating Rate.



     “Floating Rate Loan” means a Loan which, except as otherwise provided in
Section 2.12, bears interest at the Floating Rate.



     “Foreign Subsidiary” means any Subsidiary which is not a Domestic
Subsidiary.



     “Fund” means any Person (other than a natural person) that is (or will be)
engaged in making, purchasing, holding or otherwise investing in commercial
loans and similar extensions of credit in the ordinary course of its business.



     “Funding Account” is defined in Section 2.5.



     “GAAP” means generally accepted accounting principles as in effect from
time to time, applied in a manner consistent with that used in preparing the
financial statements referred to in Section 5.5.



     “Guaranteed Obligations” is defined in Section 15.1.



     “Guarantor” each Loan Party (other than the Foreign Subsidiaries) and any
other Person who becomes a Loan Party pursuant to a Joinder Agreement and their
successors and assigns.



     “Guaranty” means Article XV of this Agreement.



     “Highest Lawful Rate” shall mean, on any day, the maximum nonusurious rate
of interest permitted for that day by applicable federal or Texas law stated as
a rate per annum. On each day, if any, that Chapter 303 of the Texas Finance
Code, as amended (formerly Tex. Rev. Civ. Stat. Ann. Art. 5069-1D.003)
establishes the Highest Lawful Rate, such rate shall be the “indicated (weekly)
rate ceiling” (as defined in Chapter 303 of the Texas Finance Code, as amended)
for that day.”



     “Indebtedness” of a Person means such Person’s (a) obligations for
borrowed money, (b) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary
course of such Person’s business payable on terms customary in the trade), (c)
obligations, whether or not assumed, secured by Liens or payable out of the



15









 




proceeds or production from Property now or hereafter owned or acquired by
such Person, (d) obligations which are evidenced by notes, acceptances, or
other instruments, (e) obligations of such Person to purchase securities or
other Property arising out of or in connection with the sale of the same or
substantially similar securities or Property or any other Off-Balance Sheet
Obligations, (f) Capitalized Lease Obligations, (g) Contingent Obligations for
which the underlying transaction constitutes Indebtedness under this
definition, (h) the maximum available stated amount of all letters of credit or
bankers’ acceptances created for the account of such Person and, without
duplication, all reimbursement obligations with respect to letters of credit,
(i) Rate Management Transactions, (j) obligations of such Person under any Sale
and Leaseback Transaction, (k) obligations under any liquidated earn-out and
(l) any other obligation for borrowed money or other financial accommodation
which in accordance with GAAP would be shown as a liability on the consolidated
balance sheet of such Person.




     “Indenture” means that certain Indenture dated as of March 24, 1998 by and
between the Company and First Union National Bank.



     “Intangibles” means, as of any date, all of the intangible assets of a
Person including, without limitation, (a) any surplus resulting from any
write-up of assets subsequent to the Closing Date; (b) deferred assets, other
than prepaid insurance and prepaid taxes; (c) Intellectual Property Rights,
non-compete agreements, franchises and other similar intangibles; (d) goodwill,
including any amounts, however designated on a balance sheet, representing the
excess of the purchase price paid for assets or stock over the value assigned
thereto on the books of such Person; (e) Investments in Affiliates; (f)
unamortized debt discount and expense; and (g) Accounts, notes and other
receivables due from Affiliates or employees, all as determined for the Company
and its Subsidiaries on a consolidated basis for such period.



     “Intellectual Property Rights” means, with respect to any Person, all of
such Person’s Patents, Copyrights, Trademarks, and Licenses, all other rights
under any of the foregoing, all extensions, renewals, reissues, divisions,
continuations and continuations-in-part of any of the foregoing, and all rights
to sue for past, present, and future infringement of any of the foregoing.



     “Intercompany Notes” is defined in Section 6.17(e).



     “Interest Period” means, with respect to a Eurodollar Advance, a period of
one, two, three or six months commencing on a Business Day selected by the
Borrower Representative pursuant to this Agreement. Such Interest Period shall
end on the day which corresponds numerically to such date one, two, three or
six months thereafter, provided however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.



     “Inventory” has the meaning specified in the Security Agreement.



16









 





     “Investment” of a Person means any (a) loan, advance, extension of credit
(other than accounts receivable arising in the ordinary course of business on
terms customary in the trade) or contribution of capital by such Person, (b)
stocks, bonds, mutual funds, partnership interests, notes, debentures,
securities or other Capital Stock owned by such Person, (c) any deposit
accounts and certificate of deposit owned by such Person, and (d) structured
notes, derivative financial instruments and other similar instruments or
contracts owned by such Person.



     “Joinder Agreement” is defined in Section 6.15(a).



     “LC Fee” is defined in Section 2.10(b).



     “LC Issuer” means Bank One (or any subsidiary or Affiliate of Bank One
designated by Bank One) or any other Lender which has a Revolving Commitment
and is acceptable to the Agent and the Borrower Representative in its capacity
as an issuer of Facility LCs hereunder.



     “LC Obligations” means, at any time, the sum, without duplication, of (a)
the aggregate undrawn stated amount under all Facility LCs outstanding at such
time plus (b) the aggregate unpaid amount at such time of all Reimbursement
Obligations.



     “LC Payment Date” is defined in Section 2.1.2(d).



     “Lenders” means the lending institutions listed on the signature pages of
this Agreement and their respective successors and assigns.



     “Lending Installation” means, with respect to a Lender, the LC Issuer or
the Agent, the office, branch, subsidiary or Affiliate of such Lender, LC
Issuer or the Agent listed on the signature pages hereof or on a Schedule or
otherwise selected by such Lender, the LC Issuer or the Agent pursuant to
Section 2.22.



     “Letter of Credit” of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.



     “Lien” means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, Capitalized Lease or other title retention
agreement).



     “Licenses” shall have the meaning given to such term in the Security
Agreement.



     “Loan Documents” means this Agreement, any Notes, the Facility LC
Applications, the Collateral Documents, the Guaranty and all other agreements,
instruments, documents and certificates identified in Section 4.1 executed and
delivered to, or in favor of, Agent or any Lenders and including all other
pledges, powers of attorney, consents, assignments, contracts, notices, letter
of credit agreements and all other written matter whether heretofore, now or
hereafter executed by or on behalf of any Loan Party, or any employee of any
Loan Party, and delivered to the Agent or any Lender in connection with the
Agreement or the transactions



17









 




contemplated thereby. Any reference in the Agreement or any other Loan
Document to a Loan Document shall include all appendices, exhibits or schedules
thereto, and all amendments, restatements, supplements or other modifications
thereto, and shall refer to the Agreement or such Loan Document as the same may
be in effect at any and all times such reference becomes operative.




     “Loan Parties” means the Borrowers, the Borrowers’ Domestic Subsidiaries
and any other Person who becomes a party to this Agreement pursuant to a
Joinder Agreement and their successors and assigns.



     “Loans” means, with respect to a Lender, such Lender’s loans made pursuant
to Article II (or any conversion or continuation thereof), including
Non-Ratable Loans, Overadvances and Protective Advances.



     “Material Adverse Effect” means a material adverse effect on (a) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of Borrowers and their Subsidiaries taken as a whole, (b) the
ability of any Loan Party to perform its obligations under the Loan Documents
to which it is a party, (c) the Collateral, or the Agent’s Liens (on behalf of
itself and the Lenders) on the Collateral or the priority of such Liens or (d)
the validity or enforceability of any of the Loan Documents or the rights or
remedies of the Agent, the LC Issuer or the Lenders thereunder.



     “Material Indebtedness” means Indebtedness in an outstanding principal
amount of $1,000,000 or more in the aggregate (or the equivalent thereof in any
currency other than U.S. dollars).



     “Material Indebtedness Agreement” means any agreement under which any
Material Indebtedness was created or is governed or which provides for the
incurrence of Indebtedness in an amount which would constitute Material
Indebtedness (whether or not an amount of Indebtedness constituting Material
Indebtedness is outstanding thereunder).



     “Material License” means any of the licenses identified on Schedule 6.3(p)
hereto and any other license acquired by a Loan Party after the Closing Date
deemed material by Agent in its Permitted Discretion.



     “Modify” and “Modification” are defined in Section 2.1.2(a).



     “Moody’s” means Moody’s Investors Service, Inc.



     “Multiemployer Plan” means a Plan maintained pursuant to a collective
bargaining agreement or any other arrangement to which the Company or any
member of the Controlled Group is a party to which more than one employer is
obligated to make contributions.



     “Net Cash Proceeds” means, if in connection with (a) an asset disposition,
cash proceeds net of (i) commissions and other reasonable and customary
transaction costs, fees and expenses properly attributable to such transaction
and payable by such Loan Party in connection therewith (in each case, paid to
non-Affiliates), (ii) transfer taxes, (iii) amounts payable to holders of
senior Liens on such asset (to the extent such Liens constitute Permitted Liens
hereunder), if any, and



18









 




(iv) an appropriate reserve for income taxes in accordance with GAAP
established in connection therewith, (b) the issuance or incurrence of
Indebtedness, cash proceeds net of attorneys’ fees, investment banking fees,
accountants’ fees, underwriting discounts and commissions and other customary
fees and expenses actually incurred in connection therewith or, (c) an equity
issuance, cash proceeds net of underwriting discounts and commissions and other
reasonable costs paid to non-Affiliates in connection therewith.




     “Net Orderly Liquidation Value” means, with respect to Inventory,
Equipment or Intangibles of any Person, the orderly liquidation value thereof
as determined in a manner acceptable to the Agent by an appraiser acceptable to
the Agent, net of all costs of liquidation thereof.



     “Non-Ratable Loan” and “Non-Ratable Loans” are defined in Section 2.1.3.



     “Non-U.S. Lender” is defined in Section 3.5(d).



     “Notes” means, collectively, the Revolving Notes and the Term Notes.



     “Obligations” means all unpaid principal of and accrued and unpaid
interest on the Loans, all LC Obligations, all accrued and unpaid fees and all
expenses, reimbursements, indemnities and other obligations of the Loan Parties
to the Lenders or to any Lender, the Agent, the LC Issuer or any indemnified
party arising under the Loan Documents.



     “Off-Balance Sheet Liability” of a Person means (a) any repurchase
obligation or liability of such Person with respect to accounts or notes
receivable sold by such Person, (b) any indebtedness, liability or obligation
under any Sale and Leaseback Transaction which is not a Capitalized Lease, (c)
any indebtedness, liability or obligation under any so-called “synthetic lease”
transaction entered into by such Person, or (d) any indebtedness, liability or
obligation arising with respect to any other transaction which is the
functional equivalent of or takes the place of borrowing but which does not
constitute a liability on the balance sheets of such Person, but excluding from
this clause (d) Operating Leases.



     “Operating Lease” of a Person means any lease of Property (other than a
Capitalized Lease) by such Person as lessee which has an original term
(including any required renewals and any renewals effective at the option of
the lessor) of one year or more.



     “Operating Lease Obligations” means, as at any date of determination, the
amount obtained by aggregating the present values, determined in the case of
each particular Operating Lease by applying a discount rate (which discount
rate shall equal the discount rate which would be applied under GAAP if such
Operating Lease were a Capitalized Lease) from the date on which each fixed
lease payment is due under such Operating Lease to such date of determination,
of all fixed lease payments due under all Operating Leases of the Company and
its Subsidiaries.



     “Original Loan Agreement” means that certain Loan and Security Agreement,
dated September 29, 2000, by and among the Borrowers, certain of their
Subsidiaries, the lending institutions party thereto as lenders, Bank One, NA,
as agent and the other parties thereto, as amended.



19









 





     “Other Taxes” is defined in Section 3.5(b).



     “Overadvances” has the meaning specified in Section 2.1.4(b).



     “Participants” is defined in Section 12.2(a).



     “Patents” shall have the meaning given to such term in the Security
Agreement.



     “Payment Date” means (a) with respect to interest payments due on any
Floating Rate Loan, the first day of each calendar month and the Revolver
Termination Date, Facility Termination Date or Term B Termination Date, as
applicable, (b) with respect to interest payments due on any Eurodollar Loan,
(i) the last day of the applicable Interest Period, and (ii) in the case of any
Interest Period in excess of three months, the day which is three months after
the first day of such Interest Period, and (iii) the Revolver Termination Date,
Facility Termination Date or Term B Termination Date, as applicable, and (c)
with respect to any payment of LC Fees or Unused Commitment Fees, the first day
of each calendar month and the Facility Termination Date.



     “PBGC” means the Pension Benefit Guaranty Corporation, or any successor
thereto.



     “Permitted Accounts” means deposit accounts of the Borrowers subject to
valid, first-priority liens and security interests in favor of Agent, for the
ratable benefit of the Lenders, in accordance with Deposit Account Control
Agreements.



     “Permitted Acquisition” means any Acquisition by any Loan Party in a
transaction that satisfies each of the following requirements:




               (a) such Acquisition is not a hostile or contested acquisition;




               (b) the business acquired in connection with such Acquisition is (i)
located in the U.S., (ii) organized under U.S. and applicable state laws,
and (iii) not engaged, directly or indirectly, in any line of business
other than the businesses in which the Loan Parties are engaged on the
Closing Date and any business activities that are substantially similar,
related, or incidental thereto;




               (c) both before and after giving effect to such Acquisition and the
Loans (if any) requested to be made in connection therewith, each of the
representations and warranties in the Loan Documents is true and correct
(except (i) any such representation or warranty which relates to a
specified prior date and (ii) to the extent the Agent and the Lenders
have been notified in writing by the Loan Parties that any representation
or warranty is not correct and the Required Lenders have explicitly
waived in writing compliance with such representation or warranty) and no
Default or Unmatured Default exists, will exist, or would result
therefrom;




               (d) as soon as available, but not less than thirty days prior to
such Acquisition, the Borrower Representative has provided the Lenders
(i) notice of such Acquisition and (ii) a copy of all business and
financial information reasonably requested by the Agent



20









 






including pro forma financial statements, statements of cash flow,
and Availability projections;




               (e) if the Accounts and Inventory acquired in connection with such
Acquisition are proposed to be included in the determination of the
Borrowing Base, the Agent shall have conducted an audit and field
examination of such Accounts and Inventory to its satisfaction;




               (f) if the Acquisition occurs prior to the date upon which the Term
Loan B has been paid in full in cash, the purchase price of such
Acquisition does not exceed $10,000,000 and the consideration paid for
all Acquisitions made during the term of this Agreement shall not exceed
$30,000,000;




               (g) if the Acquisition occurs after the date upon which the Term
Loan B has been paid in full in cash, the purchase price of such
Acquisition does not exceed $20,000,000 and the consideration paid for
all Acquisitions made during the term of this Agreement shall not exceed
$45,000,000;




               (h) if such Acquisition is an acquisition of the Capital Stock of a
Person, the Acquisition is structured so that the acquired Person shall
become a Wholly-Owned Subsidiary of a Borrower and, in accordance with
Section 6.15(a), a Loan Party pursuant to the terms of this Agreement;




               (i) if such Acquisition is an acquisition of assets, the Acquisition
is structured so that a Borrower shall acquire such assets;




               (j) if such Acquisition is an acquisition of Capital Stock, such
Acquisition will not result in any violation of Regulation U;




               (k) no Loan Party shall, as a result of or in connection with any
such Acquisition, assume or incur any direct or contingent liabilities
(whether relating to environmental, tax, litigation, or other matters)
that could have a Material Adverse Effect;




               (l) in connection with an Acquisition of the Capital Stock of any
Person, all Liens on property of such Person shall be terminated unless
the Agent in its sole discretion consents otherwise, and in connection
with an Acquisition of the assets of any Person, all Liens on such assets
shall be terminated;




               (m) the Borrowers shall be in compliance with Section 6.29.1 after
giving effect to the consummation of such Acquisition;




               (n) the Borrower Representative shall certify (and provide the Agent
with a pro forma calculation in form and substance reasonably
satisfactory to the Agent), on its behalf and on behalf of the Borrowers,
to the Agent and the Lenders that, after giving effect to the completion
of such Acquisition, Availability will not be less than ten percent



21









 






(10%) of the Aggregate Borrowing Base on a pro forma basis which
includes all consideration given in connection with such Acquisition,
other than Capital Stock of a Borrower delivered to the seller(s) in such
Acquisition, as having been paid in cash at the time of making such
Acquisition;




               (o) no Default or Default exists or would result therefrom;




               (p) both before and after giving effect to such Acquisition (on a
pro forma basis), Availability is not less than $30,000,000; and




               (q) both before and after giving effect to such Acquisition (on a
pro forma basis), Borrower’s Fixed Charge Coverage Ratio shall be equal
to or greater than 1.25 to 1.0.



     “Permitted Discretion” means a determination made in good faith and in the
exercise of reasonable (from the perspective of a secured asset-based lender)
business judgment.



     “Permitted Liens” is defined in Section 6.22.



     “Person” means any natural person, corporation, firm, joint venture,
partnership, limited liability company, association, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.



     “Plan” means an employee pension benefit plan which is covered by Title IV
of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which a Loan Party or any member of the Controlled Group may have
any liability.



     “Prepayment Amount” means, as of any date of termination, the sum of the
Revolving Commitment and the aggregate outstanding principal amount of the Term
Loans as of such date of termination, immediately prior to giving effect to
such termination.



     “Prepayment Fee” is defined in Section 2.16(b).



     “Pricing Schedule” means the Schedule attached hereto identified as such.



     “Prior Agreement” is defined in Section 4.1(j).



     “Prime Rate” means a rate per annum equal to the prime rate of interest
announced from time to time by Bank One or its parent (which is not necessarily
the lowest rate charged to any customer), changing when and as said prime rate
changes.



     “Projections” is defined in Section 6.1(d).



     “Property” of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased
or operated by such Person.



     “Pro Rata Share” means, with respect to any Lender, (a) with respect to
Revolving Loans, LC Obligations, Non-Ratable Loans or Overadvances, a portion
equal to a fraction the numerator



22









 




of which is such Lender’s Revolving Commitment and the denominator of
which is the aggregate Revolving Commitment of all Revolving Lenders, (b) with
respect to Term A Loans, a portion equal to a fraction the numerator of which
is such Lender’s outstanding principal amount of the Term A Loan and the
denominator of which is the aggregate outstanding amount of the Term A Loans of
all Term A Lenders, (c) with respect to Term B Loans, a portion equal to a
fraction the numerator of which is such Lender’s outstanding principal amount
of the Term B Loan and the denominator of which is the aggregate outstanding
amount of the Term B Loans of all Term B Lenders, (d) with respect to
Protective Advances or with respect to all Credit Extensions in the aggregate
prior to the Facility Termination Date, a portion equal to a fraction the
numerator of which is such Lender’s Commitment and the denominator of which is
the Aggregate Commitment of all Lenders, and (e) with respect to Protective
Advances or with respect to all Credit Extensions in the aggregate after the
Facility Termination Date, a portion equal to a fraction the numerator of which
is such Lender’s Credit Exposure and the denominator of which is the Aggregate
Credit Exposure of all Lenders.




     “Protective Advances” is defined in Section 2.1.4(a).



     “Purchasers” is defined in Section 12.3(a).



     “Rate Management Obligations” of a Person means any and all obligations of
such Person, whether absolute or contingent and howsoever and whensoever
created, arising, evidenced or acquired (including all renewals, extensions and
modifications thereof and substitutions therefor), under (a) any and all Rate
Management Transactions, and (b) any and all cancellations, buy backs,
reversals, terminations or assignments of any Rate Management Transactions.



     “Rate Management Transaction” means any transaction (including an
agreement with respect thereto) now existing or hereafter entered by any Loan
Party which is a rate swap, basis swap, forward rate transaction, commodity
swap, commodity option, equity or equity index swap, equity or equity index
option, bond option, interest rate option, foreign exchange transaction, cap
transaction, floor transaction, collar transaction, forward transaction,
currency swap transaction, cross-currency rate swap transaction, currency
option or any other similar transaction (including any option with respect to
any of these transactions) or any combination thereof, whether linked to one or
more interest rates, foreign currencies, commodity prices, equity prices or
other financial measures.



     “Regulation D” means Regulation D of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor thereto or
other regulation or official interpretation of said Board of Governors relating
to reserve requirements applicable to member banks of the Federal Reserve
System.



     “Regulation U” means Regulation U of the Board of Governors of the Federal
Reserve System as from time to time in effect and any successor or other
regulation or official interpretation of said Board of Governors relating to
the extension of credit by banks for the purpose of purchasing or carrying
margin stocks applicable to member banks of the Federal Reserve System.



23









 





     “Reimbursement Obligations” means, at any time, the aggregate of all
obligations of the Borrowers then outstanding under Section 2.1.2 to reimburse
the LC Issuer for amounts paid by the LC Issuer in respect of any one or more
drawings under Facility LCs.



     “Reportable Event” means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within thirty
days of the occurrence of such event, provided however, that a failure to meet
the minimum funding standard of Section 412 of the Code and of Section 302 of
ERISA shall be a Reportable Event regardless of the issuance of any such waiver
of the notice requirement in accordance with either Section 4043(a) of ERISA or
Section 412(d) of the Code.



     “Reports” means reports prepared by Bank One or another Person showing the
results of appraisals, field examinations or audits pertaining to the
Borrowers’ assets from information furnished by or on behalf of the Borrowers,
after Bank One has exercised its rights of inspection pursuant to this
Agreement, which Reports may be distributed to the Lenders by Bank One.



     “Required Lenders” means Lenders in the aggregate having at least 51% of
the Aggregate Commitment or, if the Aggregate Commitment has been terminated,
Lenders in the aggregate holding at least 51% of the Aggregate Credit Exposure.



     “Required Revolving Lenders” means Revolving Lenders in the aggregate
having at least 51% of the Revolving Commitment or, if the Revolving Commitment
has been terminated, Revolving Lenders in the aggregate holding at least 51% of
the Aggregate Revolving Exposure.



     “Reserves” means any and all reserves which the Agent deems necessary, in
its Permitted Discretion, to maintain (including, without limitation, reserves
for accrued and unpaid interest on the Secured Obligations, Banking Services
Reserves, reserves for rent at locations leased by any Loan Party and for
consignee’s, warehousemen’s and bailee’s charges, reserves for dilution of
Accounts, reserves for Inventory shrinkage, reserves for customs charges and
shipping charges related to any Inventory in transit, reserves for Rate
Management Transactions, reserves for contingent liabilities of any Loan Party,
reserves for uninsured losses of any Loan Party and reserves for taxes, fees,
assessments, and other governmental charges) with respect to the Collateral or
any Loan Party.



     “Revolver Termination Date” means, June 29, 2008 or any earlier date on
which the Aggregate Commitment is reduced to zero or otherwise terminated
pursuant to the terms hereof.



     “Revolving Commitment” means (a) as to any Revolving Lender, the aggregate
commitment of such Revolving Lender to make Revolving Loans or incur LC
Obligations as set forth in the Commitment Schedule or in the most recent
Assignment Agreement executed by such Revolving Lender and (b) as to all
Revolving Lenders, the aggregate commitment of all Revolving Lenders to make
Revolving Loans or incur LC Obligations, which aggregate commitment shall be
Seventy-Five Million Dollars ($75,000,000) minus the principal amounts
outstanding from time to time under the Term Loan A and the Term Loan B, as
such amount may be adjusted, if at all, from time to time in accordance with
this Agreement, including,



24









 




without limitation, subject to the terms and conditions set forth herein,
as a result of a Revolving Commitment Adjustment Event.




     “Revolving Commitment Adjustment Event” is defined in Section 2.1.1(a).



     “Revolving Exposure” means, as to any Lender at any time, the sum of (a)
an amount equal to its Pro Rata Share of the aggregate principal amount of the
Revolving Loans outstanding at such time, plus (b) an amount equal to its Pro
Rata Share of any LC Obligations at such time, plus (c) an amount equal to its
Pro Rata Share of the aggregate principal amount of Non-Ratable Loans and
Overadvances outstanding at such time.



     “Revolving Lenders” means, as of any date of determination, Lenders having
a Revolving Commitment.



     “Revolving Loans” means the revolving loans extended by the Lenders to the
Borrowers pursuant to Section 2.1.1 hereof.



     “Revolving Note” is defined in Section 2.21(d).



     “Reserve Requirement” means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on
Eurocurrency liabilities.



     “S&P” means Standard and Poor’s Ratings Services, a division of The McGraw
Hill Companies, Inc.



     “Sale and Leaseback Transaction” means any sale or other transfer of
Property by any Person with the intent to lease such Property as lessee.



     “Schedule” refers to a specific schedule to this Agreement, unless another
document is specifically referenced.



     “Section” means a numbered section of this Agreement, unless another
document is specifically referenced.



     “Secured Obligations” means, collectively, (i) the Obligations; (ii) all
Banking Services Obligations; and (iii) all Rate Management Obligations owing
to one or more Lenders or any of their respective Affiliates, provided that at
or prior to the time that any Rate Management Transaction relating to such Rate
Management Obligation is executed, the Lender party thereto (other than Bank
One) shall have delivered written notice to the Agent that such a Rate
Management Transaction has been entered into and that it constitutes a Secured
Obligation entitled to the benefits of the Collateral Documents.



     “Security Agreement” means that certain Pledge and Security Agreement,
dated as of the date hereof, between the Loan Parties and the Agent, for the
benefit of the Agent and the Lenders, and any other pledge or security
agreement entered into, after the Closing Date by any other Loan Party (as
required by this Agreement or any other Loan Document), or any other Person, as
the same may be amended, restated or otherwise modified from time to time.



25









 





     “Single Employer Plan” means a Plan maintained by the Company or any
member of the Controlled Group for employees of the Company or any member of
the Controlled Group.



     “Standby LC Fee” is defined in Section 2.10(b).



     “Stated Rate” is defined in Section 2.24.



     “Subordinated Indebtedness” of a Person means any Indebtedness of such
Person the payment of which is subordinated to payment of the Secured
Obligations to the written satisfaction of the Agent.



     “Subsidiary” of a Person means, any corporation, partnership, limited
liability company, association, joint venture or similar business organization
more than 50% of the outstanding Capital Stock having ordinary voting power of
which shall at the time be owned or controlled by such Person. Unless
otherwise expressly provided, all references herein to a “Subsidiary” shall
mean a Subsidiary of a Borrower.



     “Substantial Portion” means Property which represents more than 10% of the
consolidated assets of the Company and its Subsidiaries or property which is
responsible for more than 10% of the consolidated net sales or of the
consolidated net income of the Company and its Subsidiaries, in each case, as
would be shown in the consolidated financial statements of the Company and its
Subsidiaries as at the beginning of the twelve-month period ending with the
month in which such determination is made (or if financial statements have not
been delivered hereunder for that month which begins the twelve-month period,
then the financial statements delivered hereunder for the quarter ending
immediately prior to that month).



     “Supporting Letter of Credit” is defined in Section 2.1.2(l).



     “Taxes” means any and all present or future taxes, duties, levies,
imposts, deductions, charges or withholdings, and any and all liabilities with
respect to the foregoing, but excluding Excluded Taxes and Other Taxes.



     “Term A Lenders” means, as of any date of determination, Lenders having a
Term A Loan Commitment.



     “Term A Loan Commitment” means (a) as to any Term A Lender, the aggregate
commitment of such Term A Lender to make Term A Loans as set forth in the
Commitment Schedule or in the most recent Assignment Agreement executed by such
Term A Lender and (b) as to all Term A Lenders, the aggregate commitment of all
Term A Lenders to make Term A Loans, which aggregate commitment shall be One
Million Seven Hundred Thousand Dollars ($1,700,000) on the Closing Date. After
advancing the Term A Loan, each reference to a Lender’s Term A Loan Commitment
shall refer to that Lender’s Pro Rata Share.



     “Term A Loans” means the term loans extended by the Lenders to the
Borrowers pursuant to Section 2.1.5 hereof.



     “Term A Note” is defined in Section 2.21(d).



26









 





     “Term B Lenders” means, as of any date of determination, Lenders having a
Term B Loan Commitment.



     “Term B Loan Commitment” means (a) as to any Term B Lender, the aggregate
commitment of such Term B Lender to make Term B Loans as set forth in the
Commitment Schedule or in the most recent Assignment Agreement executed by such
Term B Lender and (b) as to all Term B Lenders, the aggregate commitment of all
Term B Lenders to make Term B Loans, which aggregate commitment shall be Ten
Million Dollars ($10,000,000) on the Closing Date. After advancing the Term B
Loan, each reference to a Lender’s Term B Loan Commitment shall refer to that
Lender’s Pro Rata Share.



     “Term B Loans” means the term loans extended by the Lenders to the
Borrowers pursuant to Section 2.1.6 hereof.



     “Term B Note” is defined in Section 2.21(d).



     “Term B Termination Date” means the earliest of: (a) June 29, 2007 (b) any
earlier date on which the Aggregate Commitment is reduced to zero or otherwise
terminated pursuant to the terms hereof or (c) the Revolver Termination Date.



     “Term Notes” means, collectively, the Term A Notes and the Term B Notes.



     “Trademarks” shall have the meaning given to such term in the Security
Agreement.



     “Transferee” is defined in Section 12.4.



     “Type” means, with respect to any Advance, its nature as a Floating Rate
Advance or a Eurodollar Advance and with respect to any Loan, its nature as a
Floating Rate Loan or a Eurodollar Loan.



     “UCC” means the Uniform Commercial Code as in effect from time to time in
the State of Texas or any other state the laws of which are required to be
applied in connection with the issue of perfection of security interests.



     “Unfunded Liabilities” means the amount (if any) by which the present
value of all vested and unvested accrued benefits under all Single Employer
Plans exceeds the fair market value of all such Plan assets allocable to such
benefits, all determined as of the then most recent valuation date for such
Plans using PBGC actuarial assumptions for single employer plan terminations.



     “Unliquidated Secured Obligations” means, at any time, any Secured
Obligations (or portion thereof) that is contingent in nature or unliquidated
at such time, including any Secured Obligation that is: (i) an obligation to
reimburse a bank for drawings not yet made under a letter of credit issued by
it; (ii) any other obligation (including any guarantee) that is contingent in
nature at such time; or (iii) an obligation to provide collateral to secure any
of the foregoing types of obligations.



27









 





     “Unmatured Default” means an event which but for the lapse of time or the
giving of notice, or both, would constitute a Default.



     “Unused Commitment Fee” is defined in Section 2.10(a).



     “U.S.” means the United States of America.



     “Wholly-Owned Subsidiary” of a Person means, any Subsidiary all of the
outstanding Capital Stock of which shall at the time be owned or controlled,
directly or indirectly, by such Person or one or more Wholly-Owned Subsidiaries
of such Person, or by such Person and one or more Wholly-Owned Subsidiaries of
such Person.



     The foregoing definitions shall be equally applicable to both the singular
and plural forms of the defined terms.



ARTICLE II




THE FACILITY




     2.1 The Facility. Each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to (a) make Loans to the Borrowers as
set forth below and (b) participate in Facility LCs issued upon the request of
a Borrower, provided that, after giving effect to the making of each such Loan
and the issuance of each such Facility LC, such Lender’s Credit Exposure shall
not exceed its Commitment; provided further, that the Aggregate Credit Exposure
shall not exceed the Aggregate Commitment. The LC Issuer will issue Facility
LCs hereunder on the terms and conditions set forth in Section 2.1.2. The
Facility shall be composed of Revolving Loans, Non-Ratable Loans, Protective
Advances, Overadvances, Facility LCs and Term Loans as set forth below:



2.1.1 Revolving Loans.




               (a) (i) Amount. From and including the Effective Date and
prior to the Revolver Termination Date, each Revolving Lender
severally agrees, on the terms and conditions set forth in this
Agreement, to make revolving loans (the “Revolving Loans”) to the
Borrower Representative on behalf of the applicable Borrower and
participate in Facility LCs issued to any Borrower as set forth in
Section 2.1.2 below, in aggregate amounts not to exceed such
Lender’s Pro Rata Share. If any advance of a Revolving Loan or
participation in a Facility LC would exceed the Borrowers’
Availability, the Revolving Lenders will refuse to make or may
otherwise restrict the making of Revolving Loans or the issuance of
Facility LCs as the Required Revolving Lenders determine until such
excess has been eliminated, subject to the Agent’s authority, in
its sole discretion, to make Protective Advances and Overadvances
pursuant to the terms of Section 2.1.4. The Revolving Loans may
consist of Floating Rate Advances or Eurodollar Advances, or a
combination thereof, selected by the Borrower Representative in
accordance with Sections 2.1.1(b) and 2.7. Subject to the
terms of this Agreement, the Borrowers may borrow, repay and
reborrow Revolving Loans at


28









 






any time prior to the Revolver
Termination Date. The Commitments to extend credit under this
Section 2.1.1(a) shall expire on the Revolver Termination Date.




                     (ii) Increase in Revolving Commitment and Aggregate
Commitment. In the event that a Lender desires to increase
its Commitment, or a bank or other entity that is not a
Lender desires to become a Lender and provide an additional
Commitment hereunder, and so long as no Unmatured Default or
Default shall have occurred and be continuing and with the
prior written consent of Agent, the Borrower Representative
shall have the right from time to time prior to the Revolver
Termination Date with the Agent’s written consent, after not
less than thirty (30) days’ prior written notice to Agent, to
increase the Revolving Commitment (and thereby also increase
the Aggregate Commitment) in whole increments of $5,000,000
by an aggregate amount of up to $20,000,000 (subject to the
terms and conditions set forth herein, “Revolving Credit
Adjustment Event”); provided, that in no event shall (A) the
Revolving Commitment be increased to an amount greater than
$95,000,000 or (B) the Aggregate Commitment be increased to
an amount greater than $95,000,000; provided, further, that:




                         (1) If the Borrower Representative elects to
increase the Revolving Commitment of a Lender in
accordance with this Section 2.1.1(a), the Borrowers and
such Lender shall execute and deliver to the Agent a
certificate substantially in the form of Exhibit J
attached hereto (a “Commitment Increase Certificate,”
and the Borrowers shall deliver a new Revolving Note
payable to the order of such Lender in the principal
amount equal to its Revolving Commitment after giving
effect to such increase, and otherwise duly completed;




                         (2) If the Borrower Representative elects to
increase the Revolving Commitment by causing a bank or
financial institution that at such time is not a Lender
to become a Lender (an “Additional Lender”), the
Borrowers and such Additional Lender shall execute and
deliver to the Agent, a certificate substantially in
the form of Exhibit K hereto) (an “Additional Lender
Certificate”), together with an Administrative
Questionnaire as referred to in Exhibit G, and the
Borrowers shall deliver a Revolving Note payable to the
order of such Additional Lender in a principal amount
equal to its Revolving Commitment, and otherwise duly
completed; provided that, any such Additional Lender
shall be approved by the Agent (which approval shall
not be unreasonably withheld or delayed) prior to such
bank or financial institution becoming an Additional
Lender hereunder;



                         (3) Subject to acceptance and recording thereof
pursuant to this Section 2.1.1(a)(ii) hereof, from and
after the


29









 






effective date specified in the Commitment
Increase Certificate or the Additional Lender
Certificate, as applicable (or if any Eurodollar
Advance is outstanding, then on the last day of the
Interest Period in respect of such Eurodollar Advance,
unless the Borrower has paid compensation required with
respect to such Eurodollar Advance): (a) the amount of
the Aggregate Commitment, the Revolving Commitment and
the Commitment, shall be increased by the amount set
forth therein, and (b) in the case of an Additional
Lender Certificate, any Additional Lender party thereto
shall be a party to this Agreement and the other Loan
Documents and have the rights and obligations of a
Lender under this Agreement and the other Loan
Documents. In addition, the Lender or Additional
Lender, as applicable, shall purchase a pro rata
portion of the outstanding Loans (and participation
interests in Letters of Credit) of each of the other
lenders (and such Lenders hereby agree to sell and to
take all such further action to effectuate such sale)
such that each Lender (including any Additional Lender,
if applicable) shall hold its respective percentage of
the outstanding Loans (and participation interests)
after giving effect to the increase in the Aggregate
Commitment; and




                         (4) Upon its receipt of a duly completed
Commitment Increase Certificate or an Additional Lender
Certificate, as applicable, executed by the Borrowers
and the Lender or the Additional Lender party thereto,
as applicable, and the Administrative Questionnaire
referred to in Exhibit G, the Agent shall accept such
Commitment Increase Certificate or Additional Lender
Certificate and record the information contained
therein in the Register maintained by the Agent
pursuant to Section 12.3(d). No increase in the
Aggregate Commitment shall be effective for purposes of
this Agreement unless it has been recorded in the
Register as provided in Section 12.3(d) hereof.




               (b) Borrowing Procedures. The Borrower Representative shall
select the Type of Advance and, in the case of each Eurodollar
Advance, the Interest Period applicable thereto, from time to time.
The Borrower Representative shall give the Agent irrevocable
notice in the form of Exhibit A (a “Borrowing Notice”) not later
than 11:00 a.m. (Chicago time) on the Borrowing Date of each
Floating Rate Advance and three Business Days before the Borrowing
Date for each Eurodollar Advance, specifying: (1) the name of the
applicable Borrower, (2) the Borrowing Date, which shall be a
Business Day, of such Advance, (3) the aggregate amount of such
Advance, (4) the Type of Advance selected; provided that, if the
Borrower Representative fails to specify the Type of Advance
requested, such request shall be deemed a request for a Floating
Rate Advance; and (5) the duration of the Interest Period if the
Type of Advance requested is aEurodollar Advance; provided that, if the Borrower
Representative fails to select the duration of the Interest Period
for the requested Eurodollar Advance, the



30









 






Borrower Representative
shall be deemed to have requested on behalf of the applicable
Borrower that such Eurodollar Advance be made with an Interest
Period of one month.




               (c) The Agent’s Election. Promptly after receipt of a
Borrowing Notice (or telephonic notice in lieu thereof) of a
requested Floating Rate Advance, the Agent shall elect in its
discretion to have the terms of Section 2.1.1(d) (pro rata advance
by all Revolving Lenders) or Section 2.1.3 (advance by the Agent,
in the form of a Non-Ratable Loan, on behalf of the Revolving
Lenders) apply to such requested Advance.




               (d) Pro Rata Advance. Unless the Agent elects to have the
terms of Section 2.1.3 apply to a requested Floating Rate Advance
or if a requested Advance is for a Eurodollar Advance, then
promptly after receipt of a Borrowing Notice or telephonic notice
in lieu thereof as permitted by Section 2.8, the Agent shall notify
the Lenders by telecopy, telephone, or e-mail of the requested
Advance. Not later than noon (Chicago time) on each Borrowing
Date, each Lender shall make available its Revolving Loan in funds
immediately available in Chicago to the Agent and the Agent will
make the funds so received from the Lenders available to the
Borrower Representative at the Funding Account as set forth in
Section 2.5.



2.1.2 Facility LCs.




               (a) Issuance. The LC Issuer hereby agrees, on the terms and
conditions set forth in this Agreement, to issue to any Borrower
standby and commercial Letters of Credit (each, a “Facility LC”)
and to renew, extend, increase, decrease or otherwise modify each
Facility LC (“Modify,” and each such action a “Modification”), from
time to time from and including the Effective Date and prior to the
Revolver Termination Date upon the request of the Borrower
Representative for the account of the applicable Borrower; provided
that, the maximum face amount of the Facility LC to be issued or
Modified, does not exceed the least of (i) an amount equal to
$30,000,000 minus the sum of (1) the aggregate undrawn amount of
all outstanding Facility LCs at such time plus, without
duplication, (2) the aggregate unpaid Reimbursement Obligations
with respect to all Facility LCs outstanding at such time, and (ii)
the Borrowers’ Availability. No Facility LC (or any renewal
thereof) shall have an expiry date later than the earlier of (x)
the thirtieth (30th) Business Day prior to the Revolver Termination
Date and (y) one year after its issuance; provided that any Letter
of Credit with a one-year tenor may provide for the renewal thereof
for additional one-year periods (which shall in no event extend
beyond the date referred to in clause (x) above).




               (b) Participations. Upon the issuance or Modification by the
LC Issuer of a Facility LC in accordance with this Section 2.1.2,
the LC Issuer shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably sold to each Revolving Lender, and
each Revolving Lender shall



31









 






be deemed, without further action by
any party hereto, to have unconditionally and irrevocably purchased
from the LC Issuer, a participation in such Facility LC (and each
Modification thereof) and the related LC Obligations in proportion
to its Pro Rata Share. Revolving Lenders and Borrowers acknowledge
and agree that letters of credit issued under the Original Loan
Agreement and outstanding on the Closing Date constitute Facility
LCs under this Agreement, and each Revolving Lender shall be
deemed, without further action by any party hereto, to have
unconditionally and irrevocably purchased from the LC Issuer, a
participation in such Facility LC (and each Modification thereof)
and the related LC Obligations in proportion to its Pro Rata Share.




               (c) Notice. Subject to Section 2.1.2(a), the Borrower
Representative, on behalf of the applicable Borrower, shall give
the LC Issuer notice prior to 11:00 a.m. (Chicago time) at least
three Business Days prior to the proposed date of issuance or
Modification of each Facility LC, specifying the beneficiary, the
proposed date of issuance (or Modification) and the expiry date of
such Facility LC, and describing the proposed terms of such
Facility LC and the nature of the transactions proposed to be
supported thereby. Upon receipt of such notice, the LC Issuer
shall promptly notify the Agent, and the Agent shall promptly
notify each Revolving Lender, of the contents thereof and of the
amount of such Revolving Lender’s participation in such proposed
Facility LC. The issuance or Modification by the LC Issuer of any
Facility LC shall, in addition to the conditions precedent set
forth in Article IV (the satisfaction of which the LC Issuer shall
have no duty to ascertain), be subject to the conditions precedent
that such Facility LC shall be satisfactory to the LC Issuer and
that the applicable Borrower shall have executed and delivered such
application agreement and/or such other instruments and agreements
relating to such Facility LC as the LC Issuer shall have reasonably
requested (each, a “Facility LC Application”). In the event of any
conflict between the terms of this Agreement and the terms of any
Facility LC Application, the terms of this Agreement shall control.




               (d) Administration; Reimbursement by Revolving Lenders. Upon
receipt from the beneficiary of any Facility LC of any demand for
payment under such Facility LC, the LC Issuer shall notify the
Agent and the Agent shall promptly notify the Borrower
Representative and each other Revolving Lender as to the amount to
be paid by the LC Issuer as a result of such demand and the
proposed payment date (the “LC Payment Date”). The responsibility
of the LC Issuer to the Borrower Representative, the Borrowers and
each Revolving Lender shall be only to determine that the documents
(including each demand for payment) delivered under each Facility
LC in connection with such presentment shall be in conformity in
all material respects with such Facility LC. The LC Issuer shall
endeavor to exercise the same care in the issuance and
administration of the Facility LCs as it does with respect to
letters of credit in which no participations are granted, it being
understood that in the absence of any gross negligence or willful
misconduct by the LC Issuer, each Revolving Lender shall
be unconditionally and irrevocably liable without regard to
the occurrence of any Default or any condition precedent
whatsoever, to reimburse the LC Issuer on



32









 






demand for (i) such
Revolving Lender’s Pro Rata Share of the amount of each payment
made by the LC Issuer under each Facility LC to the extent such
amount is not reimbursed by the Borrowers pursuant to Section
2.1.2(e) below, plus (ii) interest on the foregoing amount to be
reimbursed by such Revolving Lender, for each day from the date of
the LC Issuer’s demand for such reimbursement (or, if such demand
is made after 11:00 a.m. (Chicago time) on such date, from the
next succeeding Business Day) to the date on which such Revolving
Lender pays the amount to be reimbursed by it, at a rate of
interest per annum equal to the Federal Funds Effective Rate for
the first three days and, thereafter, at a rate of interest equal
to the rate applicable to Floating Rate Advances.




               (e) Reimbursement by Borrowers. Each Borrower shall be
irrevocably and unconditionally obligated to reimburse the LC
Issuer on or before the applicable LC Payment Date for any amounts
to be paid by the LC Issuer upon any drawing under any Facility LC,
without presentment, demand, protest or other formalities of any
kind; provided that, no Borrower nor any Revolving Lender shall
hereby be precluded from asserting any claim for direct (but not
consequential) damages suffered by such Borrower or such Revolving
Lender to the extent, but only to the extent, caused by (i) the
willful misconduct or gross negligence of the LC Issuer in
determining whether a request presented under any Facility LC
issued by it complied with the terms of such Facility LC or (ii)
the LC Issuer’s failure to pay under any Facility LC issued by it
after the presentation to it of a request strictly complying with
the terms and conditions of such Facility LC. All such amounts
paid by the LC Issuer and remaining unpaid by the Borrowers shall
bear interest, payable on demand, for each day until paid at a rate
per annum equal to (x) the rate applicable to Floating Rate
Advances for such day if such day falls on or before the applicable
LC Payment Date and (y) the sum of 2% plus the rate applicable to
Floating Rate Advances for such day if such day falls after such LC
Payment Date. The LC Issuer will pay to each Revolving Lender
ratably in accordance with its Pro Rata Share all amounts received
by it from the Borrowers for application in payment, in whole or in
part, of the Reimbursement Obligation in respect of any Facility LC
issued by the LC Issuer, but only to the extent such Revolving
Lender has made payment to the LC Issuer in respect of such
Facility LC pursuant to Section 2.1.2(d). Subject to the terms and
conditions of this Agreement (including without limitation the
submission of a Borrowing Notice in compliance with Section
2.1.1(b) and the satisfaction of the applicable conditions
precedent set forth in Article IV), the Borrower Representative may
request an Advance hereunder on behalf of the applicable Borrower
for the purpose of satisfying any Reimbursement Obligation.




               (f) Obligations Absolute. Each Borrower’s obligations under
this Section 2.1.2 shall be absolute and unconditional under any
and all circumstances and irrespective of any setoff, counterclaim
or defense to payment which any Borrower may have or have had
against the LC Issuer, any Revolving Lender or any beneficiary of a
Facility LC. Each Borrower further agrees with the LC
Issuer and the Revolving Lenders that the LC Issuer and the
Revolving Lenders shall not be responsible for, and such Borrower’s
Reimbursement Obligation in



33









 






respect of any Facility LC shall not be
affected by, among other things, the validity or genuineness of
documents or of any endorsements thereon, even if such documents
should in fact prove to be in any or all respects invalid,
fraudulent or forged, or any dispute between or among any Borrower,
any of its Affiliates, the beneficiary of any Facility LC or any
financing institution or other party to whom any Facility LC may be
transferred or any claims or defenses whatsoever of any Borrower or
of any of its Affiliates against the beneficiary of any Facility LC
or any such transferee. The LC Issuer shall not be liable for any
error, omission, interruption or delay in transmission, dispatch or
delivery of any message or advice, however transmitted, in
connection with any Facility LC. Each Borrower agrees that any
action taken or omitted by the LC Issuer or any Revolving Lender
under or in connection with each Facility LC and the related drafts
and documents, if done without gross negligence or willful
misconduct, shall be binding upon such Borrower and shall not put
the LC Issuer or any Revolving Lender under any liability to any
Borrower. Nothing in this Section 2.1.2(f) is intended to limit
the right of the Borrowers to make a claim against the LC Issuer
for damages as contemplated by the proviso to the first sentence of
Section 2.1.2(e).




               (g) Actions of LC Issuer. The LC Issuer shall be entitled to
rely, and shall be fully protected in relying, upon any Facility
LC, draft, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document believed by it to be
genuine and correct and to have been signed, sent or made by the
proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by the
LC Issuer. The LC Issuer shall be fully justified in failing or
refusing to take any action under this Agreement unless it shall
first have received such advice or concurrence of the Required
Revolving Lenders as it reasonably deems appropriate or it shall
first be indemnified to its reasonable satisfaction by the
Revolving Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take any
such action. Notwithstanding any other provision of this Section
2.1.2, the LC Issuer shall in all cases be fully protected in
acting, or in refraining from acting, under this Agreement in
accordance with a request of the Required Revolving Lenders, and
such request and any action taken or failure to act pursuant
thereto shall be binding upon the Revolving Lenders and any future
holders of a participation in any Facility LC.




               (h) Indemnification. Each Borrower hereby agrees to, jointly
and severally, indemnify and hold harmless each Revolving Lender,
the LC Issuer and the Agent, and their respective directors,
officers, agents and employees from and against any and all claims
and damages, losses, liabilities, costs or expenses which such
Revolving Lender, the LC Issuer or the Agent may incur (or which
may be claimed against such Revolving Lender, the LC Issuer or the
Agent by any Person whatsoever) by reason of or in connection with
the issuance,
execution and delivery or transfer of or payment or failure to
pay under any Facility LC or any actual or proposed use of any
Facility LC, including, without



34









 






limitation, any claims, damages,
losses, liabilities, costs or expenses which the LC Issuer may
incur by reason of or in connection with (i) the failure of any
other Revolving Lender to fulfill or comply with its obligations to
the LC Issuer hereunder (but nothing herein contained shall affect
any rights any Borrower may have against any Defaulting Lender) or
(ii) by reason of or on account of the LC Issuer issuing any
Facility LC which specifies that the term “Beneficiary” included
therein includes any successor by operation of law of the named
Beneficiary, but which Facility LC does not require that any
drawing by any such successor Beneficiary be accompanied by a copy
of a legal document, satisfactory to the LC Issuer, evidencing the
appointment of such successor Beneficiary; provided that, the
Borrowers shall not be required to indemnify any Revolving Lender,
the LC Issuer or the Agent for any claims, damages, losses,
liabilities, costs or expenses to the extent, but only to the
extent, caused by (x) the willful misconduct or gross negligence of
the LC Issuer in determining whether a request presented under any
Facility LC complied with the terms of such Facility LC or (y) the
LC Issuer’s failure to pay under any Facility LC after the
presentation to it of a request strictly complying with the terms
and conditions of such Facility LC. Nothing in this Section
2.1.2(h) is intended to limit the obligations of the Borrowers
under any other provision of this Agreement.




               (i) Revolving Lenders’ Indemnification. Each Revolving Lender
shall, ratably in accordance with its Pro Rata Share, indemnify the
LC Issuer, its Affiliates and their respective directors, officers,
agents and employees (to the extent not reimbursed by the
Borrowers) against any cost, expense (including reasonable counsel
fees and disbursements), claim, demand, action, loss or liability
(except such as result from such indemnitees’ gross negligence or
willful misconduct or the LC Issuer’s failure to pay under any
Facility LC after the presentation to it of a request strictly
complying with the terms and conditions of the Facility LC) that
such indemnitees may suffer or incur in connection with this
Section 2.1.2 or any action taken or omitted by such indemnitees
hereunder.




               (j) Facility LC Collateral Account. The Borrowers agree that
they will, upon the request of the Agent or the Required Revolving
Lenders upon the occurrence of a Default, an Unmatured Default or a
Material Adverse Effect, or at any time when the Aggregate
Revolving Credit Exposure exceeds the lessor of (i) the Revolving
Commitment or (ii) the Aggregate Borrowing Base, and until the
final expiration date of any Facility LC and thereafter as long as
any amount is payable to the LC Issuer or the Revolving Lenders in
respect of any Facility LC, maintain a special collateral account
pursuant to arrangements satisfactory to the Agent (the “Facility
LC Collateral Account”) at the Agent’s office at the address
specified pursuant to Article XIII, in the name of the Borrowers
but under the sole dominion and control of the Agent, for the
benefit of the Lenders and in which the Borrowers shall have no
interest other than as set forth in Section 8.1. Nothing in this
Section 2.1.2(j) shall either obligate the Agent to require any
Borrower to deposit any funds in the Facility LC Collateral Account
or limit the right of the
Agent to release any funds held in the Facility LC Collateral
Account in each case other than as required by Section 8.1. Each
Borrower hereby pledges, assigns and



35









 






grants to the Agent, on behalf
of and for the ratable benefit of the Lenders and the LC Issuer, a
security interest in all of such Borrower’s right, title and
interest in and to all funds which may from time to time be on
deposit in the Facility LC Collateral Account to secure the prompt
and complete payment and performance of the Secured Obligations.
The Agent will invest any funds on deposit from time to time in the
Facility LC Collateral Account in certificates of deposit of Bank
One having a maturity not exceeding thirty days.




               (k) Rights as a Lender. In its capacity as a Lender, the LC
Issuer shall have the same rights and obligations as any other
Lender.




               (l) Termination of the Facility. If, notwithstanding the
provisions of this Section 2.1.2, any Facility LC is outstanding
upon the earlier of (x) the termination of this Agreement and (y)
the Revolver Termination Date, then upon such termination the
Borrowers shall deposit with the Agent, for the benefit of the
Agent and the Lenders, with respect to all LC Obligations, as the
Agent in its discretion shall specify, either (i) a standby letter
of credit (a “Supporting Letter of Credit”), in form and substance
satisfactory to the Agent, issued by an issuer satisfactory to the
Agent, in a stated amount equal to 105% of the difference of (x)
the amount of LC Obligations at such time, less (y) the amount on
deposit in the Facility LC Collateral Account at such time which is
free and clear of all rights and claims of third parties and has
not been applied against the Obligations (such difference, the
“Collateral Shortfall Amount”), under which Supporting Letter of
Credit the Agent is entitled to draw amounts necessary to reimburse
the Agent, the LC Issuer and the Lenders for payments to be made by
the Agent, the LC Issuer and the Lenders under any such Facility LC
and any fees and expenses associated with such Facility LC, or (ii)
cash, in immediately available funds, in an amount equal to 105% of
the Collateral Shortfall Amount to be held in the Facility LC
Collateral Account. Such Supporting Letter of Credit or deposit of
cash shall be held by the Agent, for the benefit of the Agent and
the Lenders, as security for, and to provide for the payment of,
the aggregate undrawn amount of such Facility LC remaining
outstanding.



               2.1.3 Non-Ratable Loans. Subject to the restrictions set forth in Section
2.1.1(a), the Agent may elect to have the terms of this Section 2.1.3 apply to
any requested Floating Rate Advance and Bank One shall thereafter make an
Advance, on behalf of the Revolving Lenders and in the amount requested,
available to the Borrowers on the applicable Borrowing Date by transferring
same day funds to the Funding Account. Each Advance made solely by the Agent
pursuant to this Section 2.1.3 is referred to in this Agreement as a
“Non-Ratable Loan,” and such Advances are referred to as the “Non-Ratable
Loans.” Each Non-Ratable Loan shall be subject to all the terms and conditions
applicable to other Advances funded by the Revolving Lenders, except that all
payments thereon shall be payable to Bank One solely for its own account. The
Agent shall not make any Non-Ratable Loan if the requested Non-Ratable Loan
exceeds the Borrowers’ Availability (before
giving effect to such Non-Ratable Loan). Non-Ratable Loans may be made
even if a Default or Unmatured Default exists, but may not be made if the
conditions precedent set forth in Section 4.2 have not been satisfied. The
Non-Ratable Loans shall be secured by the Liens granted to the Agent in and to
the



36









 




Collateral and shall constitute Obligations hereunder. All Non-Ratable
Loans shall be Floating Rate Advances and are subject to the settlement
provisions set forth in Section 2.19.








2.1.4 Protective Advances and Overadvances.





               (a) Protective Advances. Subject to the limitations set forth
below, the Agent is authorized by the Borrowers and the Lenders,
from time to time in the Agent’s sole discretion (but shall have
absolutely no obligation to) during the continuation of a Unmatured
Default or Default, to make Advances, on behalf of all Lenders, in
an aggregate amount outstanding at any time not to exceed ten
percent (10%) of the aggregate Revolving Commitment of all Lenders,
which the Agent, in its Permitted Discretion, deems necessary or
desirable (i) to preserve or protect the Collateral, or any portion
thereof, (ii) to enhance the likelihood of, or maximize the amount
of, repayment of the Loans and other Obligations, or (iii) to pay
any other amount chargeable to or required to be paid by the
Borrowers pursuant to the terms of this Agreement, including costs,
fees, and expenses as described in Section 9.6 (any of such
Advances are herein referred to as “Protective Advances”); provided
that, no Protective Advance shall cause the Aggregate Credit
Exposure to exceed the Aggregate Commitment. Protective Advances
may be made even if the conditions precedent set forth in Section
4.2 have not been satisfied. The Protective Advances shall be
secured by the Liens in favor of the Agent in and to the Collateral
and shall constitute Obligations hereunder. All Protective
Advances shall be Floating Rate Advances, shall bear interest at
the default rate set forth in Section 2.12 and shall be payable on
the earlier of demand or the Revolver Termination Date. The
Required Lenders may at any time revoke the Agent’s authorization
to make Protective Advances. Any such revocation must be in
writing and shall become effective prospectively upon the Agent’s
receipt thereof. At any time that there is sufficient Availability
and the conditions precedent set forth in Section 4.2 have been
satisfied, the Agent may request the Revolving Lenders to make a
Revolving Loan to repay a Protective Advance. At any other time
the Agent may require the Lenders to fund their risk participations
described in Section 2.2.




               (b) Overadvances. Any provision of this Agreement to the
contrary notwithstanding, at the request of the Borrower
Representative on behalf of any Borrower, the Agent may in its sole
discretion (but shall have absolutely no obligation to), make
Advances to the Borrower Representative (for the account of such
Borrower), on behalf of the Revolving Lenders, in amounts that
exceed Availability or such Borrower’s Availability (any such
excess Advances are herein referred to collectively as
“Overadvances”); provided that, (i) no such event or occurrence
shall cause or constitute a waiver of the Agent’s or Revolving
Lenders’ right to refuse to make any further Overadvances,
Revolving Loans or Non-Ratable Loans, or issue Facility LCs, as the
case may be, at any time that an
Overadvance exists, and (ii) no Overadvance shall result in a
Default or Unmatured Default due to such Borrower’s failure to
comply with Section 2.1.1(a) for so long as the Agent permits such
Overadvance to remain outstanding, but solely with respect to the
amount of such Overadvance. In



37









 






addition, Overadvances may be made
even if a Default or Unmatured Default exists, but may not be made
if the conditions precedent set forth in Section 4.2 have not been
satisfied (other than the condition regarding Availability and
Availability). All Overadvances shall constitute Floating Rate
Advances, shall bear interest at the default rate set forth in
Section 2.12, shall be payable on the earlier of demand or the
Revolver Termination Date and are subject to the settlement
provisions set forth in Section 2.19. The authority of the Agent
to make Overadvances is limited to an aggregate amount outstanding
at any time not to exceed ten percent (10%) of the aggregate
Revolving Commitment of all Lenders and no Overadvance shall cause
any Revolving Lender’s Revolving Credit Exposure to exceed its
Revolving Commitment or the Aggregate Credit Exposure to exceed the
Aggregate Commitment; provided that, the Required Revolving Lenders
may at any time revoke the Agent’s authorization to make
Overadvances. Any such revocation must be in writing and shall
become effective prospectively upon the Agent’s receipt thereof.



2.1.5 Term A Loans.




               (a) Amounts of Term A Loans. Each Lender severally agrees to
make a term loan (any such term loan being referred to as a “Term A
Loan” and such term loans being referred to collectively as the
“Term A Loans”) to the Borrowers on the Effective Date, in an
amount equal to such Lender’s Pro Rata Share of the Term A Loan
Commitment. The Term A Loans shall initially be Floating Rate
Advances but may be converted into Eurodollar Advances in
accordance with Section 2.7.




               (b) Initial Funding by Lenders. Each Lender shall make the
amount of such Lender’s Term A Loan available to the Agent in
immediately available funds at the Agent’s designated account, not
later than 2:00 p.m. (Chicago time) on the Effective Date. After
the Agent’s receipt of the proceeds of such Term A Loan from the
Lenders, the Agent shall make the proceeds of such Term A Loan
available to the Borrowers on the Effective Date by transferring
immediately available funds equal to the proceeds of such Term A
Loans received by the Agent to the Funding Account or as the
Borrower Representative shall otherwise instruct in writing.




               (c) Amortization; Payments. The Term A Loans shall amortize
in forty-eight (48) monthly installments. Each of the first
forty-seven (47) installments of principal shall be in an amount
equal to $28,333.33 and shall be payable on the first day of each
month, commencing on August 1, 2004 and ending on May 1, 2008. The
final installment of principal shall be in the amount of
$368,333.49 or otherwise in an amount equal to the then remaining
principal balance of the Term A Loans and shall be payable on the
Facility Termination
Date. Each such installment shall be payable to the Agent for
the account of the applicable Term A Lender. Payments or
prepayments of the Term A Loans may not be reborrowed.



38









 








2.1.6 Term B Loans.





               (a) Amounts of Term B Loans. Each Lender severally agrees to
make a term loan (any such term loan being referred to as a “Term B
Loan” and such term loans being referred to collectively as the
“Term B Loans”) to the Borrowers on the Effective Date, in an
amount equal to such Lender’s Pro Rata Share of the Term B Loan
Commitment. The Term B Loans shall initially be Floating Rate
Advances but may be converted into Eurodollar Advances in
accordance with Section 2.7.




               (b) Initial Funding by Lenders. Each Lender shall make the
amount of such Lender’s Term B Loan available to the Agent in
immediately available funds at the Agent’s designated account, not
later than 2:00 p.m. (Chicago time) on the Effective Date. After
the Agent’s receipt of the proceeds of such Term B Loan from the
Lenders, the Agent shall make the proceeds of such Term B Loan
available to the Borrowers on the Effective Date by transferring
immediately available funds equal to the proceeds of such Term B
Loans received by the Agent to the Funding Account or as the
Borrower Representative shall otherwise instruct in writing.




               (c) Amortization; Payments. The Term B Loans shall amortize
in thirty-six (36) monthly installments. Each of the thirty-five
(35) installments of principal shall be in an amount equal to
$277,777.78 and shall be payable on the first day of each month,
commencing on August 1, 2004 and ending on May 1, 2007. The final
installment of principal shall be in the amount of $277,777.78 or
otherwise in an amount equal to the then remaining principal
balance of the Term B Loans and shall be payable on the Term B
Termination Date. Each such installment shall be payable to the
Agent for the account of the applicable Term B Lender. Payments or
prepayments of the Term B Loans may not be reborrowed.



     2.2 Ratable Loans; Risk Participation. Except as otherwise provided
below, each Advance made in connection with a Revolving Loan or a Term Loan
shall consist of Loans made by each Lender in an amount equal to such Lender’s
Pro Rata Share. Upon the making of an Advance by the Agent in connection with
a Non-Ratable Loan or an Overadvance (whether before or after the occurrence of
a Default or an Unmatured Default and regardless of whether the Agent has
requested a Settlement with respect to such Non-Ratable Loan or Overadvance),
the Agent shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably sold to each Revolving Lender and each
Revolving Lender shall be deemed, without further action by any party hereto,
to have unconditionally and irrevocably purchased from the Agent, without
recourse or warranty, an undivided interest and participation in such
Non-Ratable Loan or Overadvance in proportion to its Pro Rata Share of the
Revolving Commitment. Upon the making of an Advance by the
Agent in connection with a Protective Advance (whether before or after the
occurrence of a Default or an Unmatured Default and regardless of whether the
Agent has requested a Settlement with respect to such Protective Advance), the
Agent shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably sold to each Lender and each Lender shall be
deemed, without further action by any party hereto, to have unconditionally and
irrevocably purchased from the



39









 





Agent, without recourse or warranty, an
undivided interest and participation in such Protective Advance in proportion
to its Pro Rata Share of the Aggregate Commitment. From and after the date, if
any, on which any Lender is required to fund its participation in any
Non-Ratable Loan, Overadvance or Protective Advance purchased hereunder, the
Agent shall promptly distribute to such Lender, such Lender’s Pro Rata Share of
all payments of principal and interest and all proceeds of Collateral received
by the Agent in respect of such Loan.



     2.3 Payment of the Obligations. The Borrowers shall repay (a) the
outstanding principal balance of the Term A Loans, together with all other
Obligations specifically related thereto, including, without limitation, all
accrued and unpaid interest thereon, on the Facility Termination Date, (b) the
outstanding principal balance of the Term B Loans, together with all other
Obligations specifically related thereto, including, without limitation, all
accrued and unpaid interest thereon, on the Term B Termination Date, (c) the
outstanding principal balance of the Revolving Loans, together with all other
Obligations specifically related thereto, including, without limitation, all
accrued and unpaid interest thereon, on the Revolver Termination Date, (d) the
outstanding principal balance of the Loans, together with all other
then-outstanding Obligations, including, without limitation, all accrued and
unpaid interest thereon, on the Facility Termination Date.



     2.4 Minimum Amount of Each Advance. Each Eurodollar Advance shall be in
the minimum amount of $5,000,000 and in multiples of $500,000 if in excess
thereof. Floating Rate Advances may be in any amount.



     2.5 Funding Account. The Borrower Representative shall deliver to the
Agent, on the Effective Date, a notice setting forth the deposit account of the
Borrower Representative (the “Funding Account”) to which the Agent is
authorized by the Borrowers to transfer the proceeds of any Advances requested
pursuant to this Agreement. The Borrower Representative may designate a
replacement Funding Account from time to time by written notice to the Agent.
Any designation by the Borrower Representative of the Funding Account must be
reasonably acceptable to the Agent.



     2.6 Reliance Upon Authority; No Liability. The Agent is entitled to rely
conclusively on any Authorized Person’s request for Advances hereunder, so long
as the proceeds thereof are to be transferred to the Funding Account. The
Agent shall have no duty to verify the identity of any individual representing
himself or herself as a person authorized by the Borrowers to make such
requests on their behalf. The Agent shall not incur any liability to the
Borrowers as a result of acting upon any notice
referred to in Section 2.1 which the Agent reasonably believes to have
been given by an officer or other person duly authorized by the Borrowers to
request Advances on their behalf or for otherwise acting under this Agreement.
The crediting of Advances to the Funding Account shall conclusively establish
the joint and several obligation of the Borrowers to repay such Advances as
provided herein.



     2.7 Conversion and Continuation of Outstanding Advances. Floating Rate
Advances shall continue as Floating Rate Advances unless and until such
Floating Rate Advances are converted into Eurodollar Advances pursuant to this
Section 2.7 or are repaid in accordance with this Agreement. Each Eurodollar
Advance shall continue as a Eurodollar Advance until the end of the then
applicable Interest Period therefor, at which time such Eurodollar Advance
shall be



40









 




automatically converted into a Floating Rate Advance unless (x) such
Eurodollar Advance is or was repaid in accordance with this Agreement or (y)
the Borrower Representative shall have given the Agent a
Conversion/Continuation Notice (as defined below) requesting that, at the end
of such Interest Period, such Eurodollar Advance continue as a Eurodollar
Advance for the same or another Interest Period. Subject to the terms of
Section 2.4, the Borrower Representative may elect from time to time to convert
all or any part of a Floating Rate Advance into a Eurodollar Advance on behalf
of the applicable Borrower. The Borrower Representative shall give the Agent
irrevocable notice in the form of Exhibit B (a “Conversion/Continuation
Notice”) of each conversion of a Floating Rate Advance into a Eurodollar
Advance or continuation of a Eurodollar Advance not later than 11:00 a.m.
(Chicago time) at least three Business Days prior to the date of the requested
conversion or continuation, specifying (i) the requested date, which shall be a
Business Day, of such conversion or continuation, (ii) the aggregate amount and
Type of the Advance which is to be converted or continued, and (iii) the amount
of such Advance which is to be converted into or continued as a Eurodollar
Advance and the duration of the Interest Period applicable thereto.




     2.8 Telephonic Notices. Each Borrower hereby authorizes the Lenders and
the Agent to extend, convert or continue Advances, effect selections of Types
of Advances and to transfer funds based on telephonic notices made by any
person or persons the Agent or any Lender in good faith believes to be acting
on behalf of the Borrower Representative, it being understood that the
foregoing authorization is specifically intended to allow Borrowing Notices and
Conversion/Continuation Notices to be given telephonically. The Borrower
Representative agrees to deliver promptly to the Agent a written confirmation,
if such confirmation is requested by the Agent or any Lender, of each
telephonic notice signed by an Authorized Person of the Borrower
Representative. If the written confirmation differs in any material respect
from the action taken by the Agent and the Lenders, the records of the Agent
and the Lenders shall govern absent manifest error.



     2.9 Notification of Advances, Interest Rates and Repayments. Promptly
after receipt thereof, the Agent will notify each Lender of the contents of
each Borrowing Notice, Conversion/Continuation Notice, and repayment notice
received by it hereunder. Promptly after notice from the LC Issuer, the Agent
will notify each Revolving Lender of the contents of each request for issuance
of a Facility LC hereunder or any
Modification. The Agent will notify each Lender of the interest rate
applicable to each Eurodollar Advance promptly upon determination of such
interest rate and will give each Lender prompt notice of each change in the
Alternate Base Rate.



     2.10 Fees.




             (a) Unused Commitment Fee. The Borrowers agree to pay to the
Agent, for the account of each Revolving Lender in accordance with
such Lender’s Pro Rata Share, an unused commitment fee at a per
annum rate equal to the Applicable Fee Rate on the average daily
Available Revolving Commitment, payable on each Payment Date
hereafter and on the Facility Termination Date (the “Unused
Commitment Fee”).



41









 






                    (b) LC Fees. The Borrowers shall pay to the Agent, for the
account of the Revolving Lenders ratably in accordance with their
respective Pro Rata Shares, (i) a standby letter of credit fee (the
“Standby LC Fee”) at a per annum rate equal to the Applicable
Margin for Revolving Loans constituting Eurodollar Loans in effect
from time to time on the face amount of each Facility LC that is a
standby letter of credit, and (ii) a commercial letter of credit
fee at a per annum rate equal to 1.00% of the face amount of each
Facility LC (the “Commercial LC Fee,” and together with the Standby
LC Fee, the “LC Fee”), each such LC Fee to be payable in arrears on
each Payment Date. The Borrowers shall also pay to the LC Issuer
for its own account (x) at the time of issuance of each Facility LC
that is a standby letter of credit, a fronting fee of .125% of the
face amount of such Facility LC, and (y) documentary and processing
charges in connection with the issuance or Modification of and
draws under Facility LCs in accordance with the LC Issuer’s
standard schedule for such charges as in effect from time to time.




                    (c) Agent and Arranger Fees. The Borrowers agree to pay to
the Agent and the Arranger such additional fees as are specified in
the fee letter dated as of the Closing Date among the Agent, the
Arranger and the Borrowers (the “Fee Letter”).



     2.11 Interest Rates. Each Floating Rate Advance shall bear interest on
the outstanding principal amount thereof, for each day from and including the
date such Advance is made or is automatically converted from a Eurodollar
Advance into a Floating Rate Advance pursuant to Section 2.7, to but excluding
the date it is paid or is converted into a Eurodollar Advance pursuant to
Section 2.7 hereof, at a rate per annum equal to the Floating Rate for such
day. Changes in the rate of interest on that portion of any Advance maintained
as a Floating Rate Advance will take effect simultaneously with each change in
the Alternate Base Rate. Each Eurodollar Advance shall bear interest on the
outstanding principal amount thereof from and including the first day of the
Interest Period applicable thereto to (but not including) the last day of such
Interest Period at the interest rate determined by the Agent as applicable to
such Eurodollar Advance based upon the Borrower Representative’s selections
under Sections 2.1.1 and 2.7 and otherwise in accordance with the terms hereof.
No Interest Period for any Revolving Loan, Term A Loan or Term B
Loan may end after the Revolver Termination Date, Facility Termination
Date or Term B Termination Date, respectively. If at any time Loans are
outstanding with respect to which the Borrower Representative has not delivered
a notice to the Agent specifying the basis for determining the interest rate
applicable thereto, those Loans shall bear interest at the Floating Rate.



     2.12 Eurodollar Advances Post Default; Default Rates. Notwithstanding
anything to the contrary contained hereunder, during the continuance of a
Default or Unmatured Default the Agent or the Required Lenders may, at their
option, by notice to the Borrower Representative (which notice may be revoked
at the option of the Required Lenders notwithstanding any provision of Section
8.3 requiring unanimous consent of the Lenders to reductions in interest
rates), declare that no Advance may be made as, converted into or continued as
a Eurodollar Advance. During the continuance of a Default the Agent or the
Required Lenders may, at their option, by notice to the Borrower Representative
(which notice may be revoked at the option of the Required Lenders
notwithstanding any provision of Section 8.3 requiring unanimous consent



42









 




of the
Lenders to reductions in interest rates), declare that (i) each Eurodollar
Advance shall bear interest for the remainder of the applicable Interest Period
at the rate otherwise applicable to such Interest Period plus 2% per annum,
(ii) each Floating Rate Advance shall bear interest at a rate per annum equal
to the Floating Rate in effect from time to time plus 2% per annum and (iii)
the LC Fee shall be increased by 2% per annum, provided that, during the
continuance of a Default under subsection (f) or (g) of Article VII, the
interest rates set forth in clauses (i) and (ii) above and the increase in the
LC Fee set forth in clause (iii) above shall be applicable to all Credit
Extensions without any election or action on the part of the Agent or
any Lender.




     2.13 Interest Payment Dates; Interest and Fee Basis. Interest accrued on
each Floating Rate Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof and at maturity.
Interest accrued on each Eurodollar Advance shall be payable on the last day of
its applicable Interest Period, on any date on which the Eurodollar Advance is
prepaid, whether by acceleration or otherwise, and at maturity. Interest
accrued on each Eurodollar Advance having an Interest Period longer than three
months shall also be payable on the last day of each three-month interval
during such Interest Period. Interest on all Eurodollar Advances, Eurodollar
Loans, Unused Commitment Fees and LC Fees shall be calculated for actual days
elapsed on the basis of a 360-day year or a 366-day year, as applicable.
Interest on all Floating Rate Advances and Floating Rate Loans shall be
calculated for actual days elapsed on the basis of a 365-day year. Interest
shall be payable for the day an Advance is made but not for the day of any
payment on the amount paid if payment is received prior to noon (local time) at
the place of payment. If any payment of principal of or interest on an Advance
shall become due on a day which is not a Business Day, such payment shall be
made on the next succeeding Business Day and, in the case of a principal
payment, such extension of time shall be included in computing interest in
connection with such payment. After giving effect to any Loan, Advance,
continuation, or conversion of any Eurodollar Rate Loan, there may not be more
than five (5) different Interest Periods in effect hereunder.



     2.14 Voluntary Prepayments. The Borrowers may from time to time prepay,
without penalty or premium, all or any portion of the outstanding Floating Rate
Advances. The Borrowers may also from time to time prepay, subject to the
payment of any funding indemnification amounts required by Section 3.4 but
without penalty or premium, all outstanding Eurodollar Advances, or, in a
minimum aggregate amount of $1,000,000 or any integral multiple of $500,000 in
excess thereof, any portion of the outstanding Eurodollar Advances upon three
Business Days’ prior notice to the Agent.



     2.15 Mandatory Prepayments.




                 (a) Borrowing Base Compliance. Except for Overadvances
permitted pursuant to Section 2.1.4(b), The Borrowers shall
immediately repay the Revolving Loans, Reimbursement Obligations
and/or Non-Ratable Loans if at any time the Aggregate Revolving
Exposure exceeds the lesser of (i) the Revolving Commitment, and
(ii) the Aggregate Borrowing Base, to the extent required to
eliminate such excess. If any such excess remains after repayment
in full of all outstanding Revolving Loans, Reimbursement
Obligations and Non-Ratable Loans, the Borrowers shall provide cash
collateral or a Supporting Letter of



43









 






Credit for the LC Obligations
in the manner set forth in Section 2.1.2(l) to the extent required
to eliminate such excess.




                    (b) Sale of Assets. Immediately upon receipt by any Loan
Party of the Net Cash Proceeds of any asset disposition (other than
sales of inventory in the ordinary course of business) or any
working capital, earnings, balance sheet or similar adjustment
payment in connection with a Permitted Acquisition, the applicable
Borrower shall prepay the Obligations, or shall cause the
applicable Loan Party to deliver funds to the Agent for application
to the Obligations, in an amount equal to all such Net Cash
Proceeds. Any such prepayment shall be applied first, to pay the
principal of the Overadvances and Protective Advances, second, to
scheduled principal installments of the Term A Loans in inverse
order of maturity and then to the Term B Loans in the inverse order
of maturity, third, to pay the principal of the Non-Ratable Loans,
fourth, to pay the principal of the Revolving Loans without a
concomitant reduction in the Revolving Commitment, and fifth, after
the occurrence and during the continuance of an Unmatured Default
or a Default, to cash collateralize outstanding Facility LCs.




                    (c) Issuance of Debt or Equity. If any Borrower issues
Capital Stock or any Loan Party issues Indebtedness (other than
Indebtedness permitted by Sections 6.17(a), (c), (e), and (g) or if
any Loan Party receives any dividend or distribution from a Person
other than a Loan Party (other than dividends or distributions
received from Action Performance Holdings GmbH or Action-McFarlane,
LLC in the ordinary course of business), no later than the Business
Day following the date of receipt of any Net Cash Proceeds of such
issuance or receipt of such dividend, distribution, loan or
advance, the Borrowers shall prepay the Obligations in an amount
equal to all such Net Cash Proceeds, dividends,
distributions, loans or advances. Any such prepayment shall
be applied first, to pay the principal of the Overadvances and
Protective Advances, second, to scheduled principal installments of
the Term B Loans in inverse order of maturity and then to the Term
A Loans in the inverse order of maturity, third, to pay the
principal of the Non-Ratable Loans, fourth, to pay the principal of
the Revolving Loans without a concomitant reduction in the
Revolving Commitment, and fifth, after the occurrence and during
the continuance of an Unmatured Default or a Default, to cash
collateralize outstanding Facility LCs.




                    (d) Excess Cash Flow. Until the Term B Termination Date, the
Borrowers shall prepay the Obligations on the date that is ten days
after the earlier of (i) the date on which Borrowers’ annual
audited Financial Statements for the immediately preceding Fiscal
Year are delivered pursuant to Section 6.1 or (ii) the date on
which such annual audited Financial Statements were required to be
delivered pursuant to Section 6.1, in an amount equal to fifty
percent (50%) of the Borrowers’ Excess Cash Flow for the
immediately preceding Fiscal Year. Any such prepayment shall be
applied to first, to pay the principal of the Overadvances and
Protective Advances, second, to scheduled principal installments of
the Term B Loans in inverse order of maturity and third, to pay the
principal of the Non-Ratable Loans. Each such prepayment shall be
accompanied by a certificate



44









 






signed by the chief financial officer
of the Borrower Representative (on behalf of the Borrowers)
certifying the manner in which Excess Cash Flow and the resulting
prepayment were calculated, which certificate shall be in form and
substance satisfactory to the Agent.




                    (e) Insurance/Condemnation Proceeds. Any insurance or
condemnation proceeds to be applied to the Obligations in
accordance with Section 6.7(c) shall be applied as follows: (i)
insurance proceeds from casualties or losses to cash or Inventory
shall be applied, first, to the Overadvances and Protective
Advances, pro rata, second, to the Non-Ratable Loans, third, to the
Revolving Loans, fourth, to cash collateralize outstanding Facility
LCs of the Borrower who received such proceeds, fifth, to the to
cash collateralize outstanding Facility LCs of the other Borrowers,
and sixth, to scheduled principal installments of the Term A Loans
in inverse order of maturity and then, to the Term B Loans in the
inverse order of maturity; and (ii) insurance or condemnation
proceeds from casualties or losses to Equipment, Fixtures and real
Property shall be applied first, to pay the principal of the
Overadvances and Protective Advances, second, to scheduled
principal installments of the Term A Loans in inverse order of
maturity and then to the Term B Loans in the inverse order of
maturity, third, to pay the principal of the Non-Ratable Loans,
fourth, to pay the principal of the Revolving Loans, and fifth,
after the occurrence and during the continuance of an Unmatured
Default or a Default, to cash collateralize outstanding Facility
LCs. The Revolving Commitment shall not be permanently reduced by
the amount of any such prepayments. If the precise amount of
insurance or condemnation proceeds allocable to Inventory as
compared to Equipment, Fixtures and real Property is not otherwise
determined, the allocation
and application of those proceeds shall be determined by the
Agent, in its Permitted Discretion.




                    (f) General. Without in any way limiting the foregoing,
immediately upon receipt by any Loan Party of proceeds of any sale
of any Collateral, the Borrowers shall cause such Loan Party to
deliver such proceeds to the Agent, or deposit such proceeds in a
deposit account subject to a Deposit Account Control Agreement.
All of such proceeds shall be applied as set forth above or
otherwise as provided in Section 2.18. Nothing in this Section
2.15 shall be construed to constitute Agent’s or any Lender’s
consent to any transaction that is not permitted by other
provisions of this Agreement or the other Loan Documents.




                    (g) The applicable Borrower shall immediately repay the Term A
Loans if at any time the aggregate outstanding principal amount of
the Term A Loans relating to such Borrower exceeds 80% of the Net
Orderly Liquidation of such Borrower’s Eligible Equipment, to the
extent required to eliminate such excess.



     2.16 Termination of the Facility.



45









 






                    (a) Without limiting Section 2.3 or Section 8.1, (i) the
Aggregate Commitments shall expire on the Facility Termination
Date, (ii) the Aggregate Credit Exposure and all other unpaid
Obligations shall be paid in full by the Borrowers on the Facility
Termination Date, (iii) the Revolving Commitment shall expire on
the Revolver Termination Date, (iv) the aggregate principal amount
of the Term A Loans and all other unpaid Obligations related
specifically thereto shall be paid in full by the Borrowers on the
Facility Termination Date and (v) the aggregate principal amount of
the Term B Loans and all other unpaid Obligations related
specifically thereto shall be paid in full by the Borrowers on the
Term B Termination Date.




                    (b) The Borrowers may terminate this Agreement with at least
ten Business Days’ prior written notice thereof to the Agent and
the Lenders, upon (i) the payment in full of all outstanding Loans,
together with accrued and unpaid interest thereon, (ii) the
cancellation and return of all outstanding Facility LCs (or
alternatively, with respect to each such Facility LC, the
furnishing to the Agent of a cash deposit or Supporting Letter of
Credit as required by Section 2.1.2(l)), (iii) the payment in full
of the early termination fee set forth in the following sentence
(the “Prepayment Fee”), (iv) the payment in full of all
reimbursable expenses and other Obligations together with accrued
and unpaid interest thereon, and (v) the payment in full of any
amount due under Section 3.4. Subject to Section 2.24, if this
Agreement is terminated at any time prior to the Facility
Termination Date, whether pursuant to this Section 2.16 or pursuant
to Section 8.1, the Borrower shall pay to the Agent, for the
account of the Lenders, an early termination fee determined in
accordance with the following table:



	 	 	 
	Period during which early	 	 
	termination occurs
	 	Prepayment Fee

	On or prior to the first
anniversary of the Closing
Date

	 	1.0% of the Prepayment Amount
	 
	 	 
	After the first
anniversary of the Closing
Date but on or prior to
the second anniversary of
the Closing Date

	 	.50% of the Prepayment Amount
	 
	 	 
	After the second
anniversary of the Closing
Date

	 	0% of the Prepayment Amount






No such Prepayment Fee shall be payable in the event this Agreement is
terminated in connection with refinancing of the Obligations in a transaction
in which Bank One or one of its Affiliates that is a banking institution
provides or arranges a replacement bank credit facility for the Borrowers.




     2.17 Method of Payment.




                    (a) All payments of the Obligations hereunder shall be made,
without setoff, deduction, or counterclaim, in immediately
available funds to the Agent at



46









 






the Agent’s address specified
pursuant to Article XIII, or at any other Lending Installation of
the Agent specified in writing by the Agent to the Borrower
Representative, by noon (local time) on the date when due and shall
be applied ratably by the Agent among the Lenders. Any payment
received by the Agent after such time shall be deemed to have been
received on the following Business Day and any applicable interest
or fee shall continue to accrue. Solely for purposes of
determining the amount of Loans available for borrowing purposes,
checks and cash or other immediately available funds from
collections of items of payment and proceeds of any Collateral
shall be applied in whole or in part against the Obligations, on
the day of receipt, subject to actual collection. Each payment
delivered to the Agent for the account of any Lender shall be
delivered promptly by the Agent to such Lender in the same type of
funds that the Agent received at its address specified pursuant to
Article XIII or at any Lending Installation specified in a notice
received by the Agent from such Lender.




                    (b) At the election of the Agent, all payments of principal,
interest, reimbursement obligations in connection with Facility
LCs, fees, premiums, reimbursable expenses (including, without
limitation, all reimbursement for fees and expenses pursuant to
Section 9.6), and other sums payable under the Loan Documents, may
be paid from the proceeds of Advances made hereunder whether made
following a request by the Borrower Representative pursuant to
Section 2.1 or a deemed request as provided in this Section 2.17 or
may be deducted from the Funding Account or any other deposit
account of any Borrower maintained with the Agent. Each Borrower
hereby irrevocably authorizes (i) the Agent to make an Advance for
the purpose of paying each payment of principal, interest and fees
as it becomes due hereunder or any other amount due under the Loan
Documents and agrees that all such amounts charged shall constitute
Loans (including Non-
Ratable Loans , Overadvances and Protective Advances) and that
all such Advances shall be deemed to have been requested pursuant
to Section 2.1 and (ii) the Agent to charge the Funding Account or
any other deposit account of any Borrower maintained with Bank One
for each payment of principal, interest and fees as it becomes due
hereunder or any other amount due under the Loan Documents.



     2.18 Apportionment, Application, and Reversal of Payments. Except as
otherwise required pursuant to Section 2.19, principal and interest payments
shall be apportioned ratably among the Lenders as set forth in this Article II
and payments of the fees shall, as applicable, be apportioned ratably among the
Lenders, except for fees payable solely to the Agent or the LC Issuer and
except as provided in Section 2.10(c). All payments shall be remitted to the
Agent and all such payments not relating to principal or interest of specific
Loans or not constituting payment of specific fees as specified by the Borrower
Representative, and all proceeds of any Collateral received by the Agent, shall
be applied, ratably, subject to the provisions of this Agreement, first, to pay
any fees, indemnities, or expense reimbursements including amounts then due to
the Agent from the Borrowers (other than in connection with Banking Services or
Rate Management Obligations), second, to pay any fees or expense reimbursements
then due to the Lenders from the Borrowers (other than in connection with
Banking Services or Rate Management Obligations), third, to pay interest due in
respect of the Overadvances and



47









 




Protective Advances, fourth, to pay the
principal of the Overadvances and Protective Advances, fifth, to pay interest
due in respect of the Non-Ratable Loans, sixth, to pay interest due in respect
of the Revolving Loans (other than Non-Ratable Loans, Overadvances and
Protective Advances), seventh, to pay or prepay principal of the Non-Ratable
Loans, eighth, to pay or prepay principal of the Revolving Loans (other than
Non-Ratable Loans, Overadvances and Protective Advances) and unpaid
reimbursement obligations in respect of Facility LCs, ninth, to pay an amount
to the Agent equal to one hundred five percent (105%) of the aggregate undrawn
face amount of all outstanding Facility LCs and the aggregate amount of any
unpaid reimbursement obligations in respect of Facility LCs, to be held as cash
collateral for such Obligations, tenth, to interest then due and payable on the
Term A Loans and then to interest due and payable on the Term B Loans,
eleventh, to prepay the scheduled principal installments of the Term A Loans in
inverse order of maturity and then to prepay the scheduled principal
installments of the Term B Loans in the inverse order of maturity, twelfth, to
payment of any amounts owing with respect to Banking Services and Rate
Management Obligations, and thirteenth, to the payment of any other Secured
Obligation due to the Agent or any Lender by the Borrowers. Notwithstanding
anything to the contrary contained in this Agreement, unless so directed by the
Borrower Representative, or unless a Default is in existence, neither the Agent
nor any Lender shall apply any payment which it receives to any Eurodollar
Loan, except (a) on the expiration date of the Interest Period applicable to
any such Eurodollar Loan or (b) in the event, and only to the extent, that
there are no outstanding Floating Rate Loans and, in any event, the Borrowers
shall pay the Eurodollar breakage losses in accordance with Section 3.4. The
Agent and the Lenders shall have the continuing and exclusive right to apply
and reverse and reapply any and all such proceeds and payments to any portion
of the Secured Obligations.




     2.19 Settlement. Each Revolving Lender’s funded portion of the Loans is intended by the
Revolving Lenders to be equal at all times to such Revolving Lender’s Pro Rata
Share of the outstanding Loans. Notwithstanding such agreement, the Agent,
Bank One, and the Lenders agree (which agreement shall not be for the benefit
of or enforceable by the Loan Parties) that in order to facilitate the
administration of this Agreement and the other Loan Documents, settlement among
them as to the Loans, including the Non-Ratable Loans and Overadvances shall
take place on a periodic basis as follows. The Agent shall request settlement
(a “Settlement”) with the Lenders on at least a weekly basis, or on a more
frequent basis at the Agent’s election, by notifying the Lenders of such
requested Settlement by telecopy, telephone, or e-mail no later than 12:00 noon
(Chicago time) on the date of such requested Settlement (the “Settlement
Date”). Each Revolving Lender (other than the Agent, in the case of the
Non-Ratable Loans and Overadvances) shall transfer the amount of such Revolving
Lender’s Pro Rata Share of the outstanding principal amount of the applicable
Loan with respect to which Settlement is requested to the Agent, to such
account of the Agent as the Agent may designate, not later than 2:00 p.m.
(Chicago time), on the Settlement Date applicable thereto. Settlements may
occur during the existence of a Default or an Unmatured Default and whether or
not the applicable conditions precedent set forth in Section 4.2 have then been
satisfied. Such amounts transferred to the Agent shall be applied against the
amounts of the applicable Loan and, together with Bank One’s Pro Rata Share of
such Non-Ratable Loan or Overadvance, shall constitute Revolving Loans of such
Lenders, respectively. If any such amount is not transferred to the Agent by
any Lender on the Settlement Date applicable thereto, the Agent shall be
entitled to recover such amount on demand from such Lender together with
interest thereon as specified in Section 2.23.



48









 





     2.20 Indemnity for Returned Payments. If after receipt of any payment
which is applied to the payment of all or any part of the Obligations, the
Agent or any Lender is for any reason compelled to surrender such payment or
proceeds to any Person because such payment or application of proceeds is
invalidated, declared fraudulent, set aside, determined to be void or voidable
as a preference, impermissible setoff, or a diversion of trust funds, or for
any other reason, then the Obligations or part thereof intended to be satisfied
shall be revived and continued and this Agreement shall continue in full force
as if such payment or proceeds had not been received by the Agent or such
Lender and the Borrowers shall be liable to pay to the Agent and the Lenders,
and each Borrower hereby indemnifies the Agent and the Lenders and holds the
Agent and the Lenders harmless for the amount of such payment or proceeds
surrendered. The provisions of this Section 2.20 shall be and remain effective
notwithstanding any contrary action which may have been taken by the Agent or
any Lender in reliance upon such payment or application of proceeds, and any
such contrary action so taken shall be without prejudice to the Agent’s and the
Lenders’ rights under this Agreement and shall be deemed to have been
conditioned upon such payment or application of proceeds having become final
and irrevocable. The provisions of this Section 2.20 shall survive the
termination of this Agreement.



     2.21 Noteless Agreement; Evidence of Indebtedness.




                    (a) Each Lender shall maintain in accordance with its usual
practice an account or accounts evidencing the indebtedness of the
Borrowers to such Lender resulting from each Loan made by such
Lender from time to time, including the
amounts of principal and interest payable and paid to such
Lender from time to time hereunder.




                    (b) The Agent shall also maintain accounts in which it will
record (i) the amount of each Loan extended hereunder, the Type
thereof, the name of the Borrower who requested such Loan and the
Interest Period with respect thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable
from the Borrowers to each Lender hereunder, (iii) the original
stated amount of each Facility LC and the amount of LC Obligations
outstanding at any time, and (iv) the amount of any sum received by
the Agent hereunder from the Borrowers and each Lender’s share
thereof.




                    (c) The entries maintained in the accounts maintained pursuant
to paragraphs (a) and (b) above shall be prima facie evidence of
the existence and amounts of the Obligations therein recorded;
provided however, that the failure of the Agent or any Lender to
maintain such accounts or any error therein shall not in any manner
affect the obligation of the Borrowers to repay the Obligations in
accordance with their terms.




                    (d) Any Lender may request that its Revolving Loans be
evidenced by a promissory note in substantially the form of Exhibit
C (a “Revolving Note”), that its Term A Loans be evidenced by a
promissory note in substantially the form of Exhibit C-2 attached
hereto (a “Term A Note”) and that its Term B Loans be evidenced by
a promissory note in substantially the form of Exhibit C-3 attached
hereto (a “Term B Note”). In such event, each Borrower shall
prepare, execute



49









 






and deliver to such Lender such Note payable to
the order of such Lender. Thereafter, the Revolving Loans
evidenced by such Revolving Note, the Term A Loans evidenced by
such Term A Note or the Term B Loans evidenced by the Term B Notes
and interest thereon shall at all times (prior to any assignment
pursuant to Section 12.3) be represented by one or more Notes
payable to the order of the payee named therein, except to the
extent that any such Lender subsequently returns any such Note for
cancellation and requests that such Revolving Loans, Term A Loans
or Term B Loans once again be evidenced as described in paragraphs
(a) and (b) above.



     2.22 Lending Installations. Each Lender may book its Loans and its
participation in any LC Obligations and the LC Issuer may book the Facility LCs
at any Lending Installation selected by such Lender or the LC Issuer, as the
case may be, and may change its Lending Installation from time to time. All
terms of this Agreement shall apply to any such Lending Installation and the
Loans, Facility LCs, Reimbursement Obligations and any Notes issued hereunder
shall be deemed held by each Lender or the LC Issuer, as the case may be, for
the benefit of any such Lending Installation. Each Lender and the LC Issuer
may, by written notice to the Agent and the Borrower Representative in
accordance with Article XIII, designate replacement or additional Lending
Installations through which Loans will be made by it or Facility LCs will be
issued by it and for whose account Loan payments or payments with respect to
Facility LCs are to be made.



     2.23 Non-Receipt of Funds by the Agent; Defaulting Lenders.




                    (a) Unless the Borrower Representative or a Lender, as the
case may be, notifies the Agent prior to the date on which it is
scheduled to make payment to the Agent of (i) in the case of a
Lender, the proceeds of a Loan or (ii) in the case of the
Borrowers, a payment of principal, interest or fees to the Agent
for the account of the Lenders, that it does not intend to make
such payment, the Agent may assume that such payment has been made.
The Agent may, but shall not be obligated to, make the amount of
such payment available to the intended recipient in reliance upon
such assumption. If such Lender or the Borrowers, as the case may
be, have not in fact made such payment to the Agent, the recipient
of such payment shall, on demand by the Agent, repay to the Agent
the amount so made available together with interest thereon in
respect of each day during the period commencing on the date such
amount was so made available by the Agent until the date the Agent
recovers such amount at a rate per annum equal to (x) in the case
of payment by a Lender, the Federal Funds Effective Rate for such
day for the first three days and, thereafter, the interest rate
applicable to the relevant Loan or (y) in the case of payment by
the Borrowers, the interest rate applicable to the relevant Loan.




                    (b) If a payment has not been made by a Lender (a “Defaulting
Lender”), the Agent will notify the Borrower Representative of such
failure to fund and, upon demand by the Agent, the Borrowers shall
pay such amount to the Agent for the Agent’s account, together with
interest thereon for each day elapsed since the Borrowing Date at a
rate per annum equal to the interest rate applicable



50









 






to the
relevant Loan. The Agent shall not be obligated to transfer to a
Defaulting Lender any payments made by the Borrowers to the Agent
for the Defaulting Lender’s benefit, and, in the absence of such
transfer to the Defaulting Lender, the Agent shall transfer any
such payments to each other non-Defaulting Lender ratably in
accordance with their Pro Rata Share of the Commitments (but only
to the extent that such Defaulting Lender’s Advance was funded by
the other Lenders) or, if so directed by the Borrower
Representative and if no Unmatured Default or Default has occurred
and is continuing (and to the extent such Defaulting Lender’s
Advance was not funded by the other Lenders), retain the same to be
re-advanced to the Borrowers as if such Defaulting Lender had made
Advances to the Borrowers. Subject to the foregoing, the Agent may
hold and, in its Permitted Discretion, setoff such Defaulting
Lender’s funding shortfall against that Defaulting Lender’s Pro
Rata Share of all payments received from the Borrowers or re-lend
to the Borrowers for the account of such Defaulting Lender the
amount of all such payments received and retained by the Agent for
the account of such Defaulting Lender. Until a Defaulting Lender
cures its failure to fund its Pro Rata Share of any Advance (i)
solely for the purposes of voting or consenting to matters with
respect to the Loan Documents, such Defaulting Lender shall be
deemed not to be a “Lender” and such Defaulting Lender’s Commitment
shall be deemed to be zero, (ii) such Defaulting Lender shall not
be entitled to any portion of the Unused Commitment Fee and (iii)
the Unused Commitment Fee shall accrue in favor of the Lenders
which have funded their
respective Pro Rata Shares of such requested Advance and shall
be allocated among such non-Defaulting Lenders ratably based on
their Pro Rata Share of the Commitments. This Section shall remain
effective with respect to such Defaulting Lender until (x) the
Obligations under this Agreement shall have been declared or shall
have become immediately due and payable, (y) the non-Defaulting
Lenders, the Agent, and the Borrower Representative shall have
waived such Defaulting Lender’s default in writing, or (z) the
Defaulting Lender makes its Pro Rata Share of the applicable
Advance and pays to the Agent all amounts owing by the Defaulting
Lender in respect thereof. The operation of this Section shall not
be construed to increase or otherwise affect the Commitment of any
Lender, to relieve or excuse the performance by such Defaulting
Lender or any other Lender of its duties and obligations hereunder.



     2.24 Limitation of Interest. The Borrowers, the Agent and the Lenders
intend to strictly comply with all applicable laws, including applicable usury
laws. Accordingly, the provisions of this Section 2.24 shall govern and
control over every other provision of this Agreement or any other Loan Document
which conflicts or is inconsistent with this Section 2.24, even if such
provision declares that it controls. As used in this Section 2.24, the term
“interest” includes the aggregate of all charges, fees, benefits or other
compensation which constitute interest under applicable law, provided that, to
the maximum extent permitted by applicable law, (a) any non-principal payment
shall be characterized as an expense or as compensation for something other
than the use, forbearance or detention of money and not as interest, and (b)
all interest at any time contracted for, reserved, charged or received shall be
amortized, prorated, allocated and spread, in equal parts during the full term
of the Obligations. In no event shall the Borrowers or any other Person be
obligated to pay, or any Lender have any right or privilege to




51









 




reserve, receive
or retain, (a) any interest in excess of the maximum amount of nonusurious
interest permitted under the laws of the State of Texas or the applicable laws
(if any) of the U.S. or of any other applicable state, or (b) total interest in
excess of the amount which such Lender could lawfully have contracted for,
reserved, received, retained or charged had the interest been calculated for
the full term of the Obligations at the Highest Lawful Rate. On each day, if
any, that the interest rate (the “Stated Rate”) called for under this Agreement
or any other Loan Document exceeds the Highest Lawful Rate, the rate at which
interest shall accrue shall automatically be fixed by operation of this
sentence at the Highest Lawful Rate for that day, and shall remain fixed at the
Highest Lawful Rate for each day thereafter until the total amount of interest
accrued equals the total amount of interest which would have accrued if there
were no such ceiling rate as is imposed by this sentence. Thereafter, interest
shall accrue at the Stated Rate unless and until the Stated Rate again exceeds
the Highest Lawful Rate when the provisions of the immediately preceding
sentence shall again automatically operate to limit the interest accrual rate.
The daily interest rates to be used in calculating interest at the Highest
Lawful Rate shall be determined by dividing the applicable Highest Lawful Rate
per annum by the number of days in the calendar year for which such calculation
is being made. None of the terms and provisions contained in this Agreement or
in any other Loan Document which directly or indirectly relate to interest
shall ever be construed without reference to this Section 2.24, or be construed
to create a contract to pay for the use, forbearance or detention of money at
an interest rate in excess of the Highest Lawful Rate. If the term of any
Obligation is shortened by reason of acceleration of maturity as a result of
any
Default or by any other cause, or by reason of any required or permitted
prepayment, and if for that (or any other) reason any Lender at any time,
including but not limited to, the stated maturity, is owed or receives (and/or
has received) interest in excess of interest calculated at the Highest Lawful
Rate, then and in any such event all of any such excess interest shall be
canceled automatically as of the date of such acceleration, prepayment or other
event which produces the excess, and, if such excess interest has been paid to
such Lender, it shall be credited pro tanto against the then-outstanding
principal balance of the Borrowers’ obligations to such Lender, effective as of
the date or dates when the event occurs which causes it to be excess interest,
until such excess is exhausted or all of such principal has been fully paid and
satisfied, whichever occurs first, and any remaining balance of such excess
shall be promptly refunded to its payor. Chapter 346 of the Texas Finance Code
(which regulates certain revolving credit accounts (formerly Tex. Rev. Civ.
Stat. Ann. Art. 5069, Ch. 15)) shall not apply to this Agreement or to any
Loan, nor shall this Agreement or any Loan be governed by or be subject to the
provisions of such Chapter 346 in any manner whatsoever.





52









 






     2.25 Borrower’s Reduction of Commitment. Prior to the Facility
Termination Date, Borrower may, upon five (5) Business Days’ prior written
notice to Agent, permanently reduce the Revolving Commitment to a lesser
amount, provided that such reduction must be $5,000,000 or a higher integral
multiple of $1,000,000 and the amount of the Revolving Commitment may not be
reduced, in the aggregate, by more than the lesser of (a) the Availability at
such time and (b) $10,000,000.



ARTICLE III




YIELD PROTECTION; TAXES




     3.1 Yield Protection. If, on or after the Closing Date, the adoption of
any law or any governmental or quasi-governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any change
in the interpretation or administration thereof by any governmental or
quasi-governmental authority, central bank or comparable agency charged with
the interpretation or administration thereof, or compliance by any Lender or
applicable Lending Installation or the LC Issuer with any request or directive
(whether or not having the force of law) of any such authority, central bank or
comparable agency:




                    (a) subjects any Lender or any applicable Lending Installation
or the LC Issuer to any Taxes, or changes the basis of taxation of
payments (other than with respect to Excluded Taxes) to any Lender
or the LC Issuer in respect of its Eurodollar Loans, Facility LCs
or participations therein, or




                    (b) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the account of,
or credit extended by, any Lender or any applicable Lending
Installation or the LC Issuer (other than reserves and assessments
taken
into account in determining the interest rate applicable to
Eurodollar Advances), or




                    (c) imposes any other condition the result of which is to
increase the cost to any Lender or any applicable Lending
Installation or the LC Issuer of making, funding or maintaining its
Eurodollar Loans, or of issuing or participating in Facility LCs,
or reduces any amount receivable by any Lender or any applicable
Lending Installation or the LC Issuer in connection with its
Eurodollar Loans, Facility LCs or participations therein, or
requires any Lender or any applicable Lending Installation or the
LC Issuer to make any payment calculated by reference to the amount
of Eurodollar Loans, Facility LCs or participations therein held or
interest or LC Fees received by it, by an amount deemed material by
such Lender or the LC Issuer as the case may be,


and the result of any of the foregoing is to increase the cost to such Lender
or applicable Lending Installation or the LC Issuer, as the case may be, of
making or maintaining its Eurodollar Loans or Commitment or of issuing or
participating in Facility LCs or to reduce the return received by such Lender
or applicable Lending Installation or the LC Issuer, as the case may be, in






53









 




connection with such Eurodollar Loans, Commitment, Facility LCs or
participations therein, then, within fifteen days of demand by such Lender or
the LC Issuer, as the case may be, the Borrowers shall pay such Lender or the
LC Issuer, as the case may be, such additional amount or amounts as will
compensate such Lender or the LC Issuer, as the case may be, for such increased
cost or reduction in amount received.




     3.2 Changes in Capital Adequacy Regulations. If a Lender or the LC Issuer
determines the amount of capital required or expected to be maintained by such
Lender or the LC Issuer, any Lending Installation of such Lender or the LC
Issuer, or any corporation controlling such Lender or the LC Issuer is
increased as a result of a Change, then, within fifteen days of demand by such
Lender or the LC Issuer, the Borrowers shall pay such Lender or the LC Issuer
the amount necessary to compensate for any shortfall in the rate of return on
the portion of such increased capital which such Lender or the LC Issuer
determines is attributable to this Agreement, its Credit Exposure or its
Commitment to make Loans and issue or participate in Facility LCs, as the case
may be, hereunder (after taking into account such Lender’s or the LC Issuer’s
policies as to capital adequacy). “Change” means (i) any change after the date
of this Agreement in the Risk-Based Capital Guidelines (as defined below) or
(ii) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Lender or the LC Issuer or any Lending Installation or any
corporation controlling any Lender or the LC Issuer. “Risk-Based Capital
Guidelines” means (i) the risk � based capital guidelines in effect in the U.S.
on the date of this Agreement, including transition rules, and (ii) the
corresponding capital regulations promulgated by regulatory authorities outside
the U.S. implementing the July 1988 report of the Basle Committee on Banking
Regulation and Supervisory Practices Entitled “International Convergence of
Capital Measurements and Capital Standards,” including transition rules, and
any amendments to such regulations adopted prior to the date of this Agreement.



     3.3 Availability of Types of Advances.
If any Lender determines that maintenance of its Eurodollar Loans at a
suitable Lending Installation would violate any applicable law, rule,
regulation, or directive, whether or not having the force of law, or if the
Required Lenders determine that (i) deposits of a type and maturity appropriate
to match fund Eurodollar Advances are not available or (ii) the interest rate
applicable to Eurodollar Advances does not accurately reflect the cost of
making or maintaining Eurodollar Advances, then the Agent shall suspend the
availability of Eurodollar Advances and require any affected Eurodollar
Advances to be repaid or converted to Floating Rate Advances, subject to the
payment of any funding indemnification amounts required by Section 3.4.



     3.4 Funding Indemnification. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower Representative for
any reason other than default by the Lenders, the Borrowers will indemnify each
Lender for any loss or cost incurred by it resulting therefrom, including,
without limitation, any loss or cost in liquidating or employing deposits
acquired to fund or maintain such Eurodollar Advance.



54









 





     3.5 Taxes.




     (a) All payments by the Borrowers to or for the account of any
Lender, the LC Issuer or the Agent hereunder or under any Note or
Facility LC Application shall be made free and clear of and without
deduction for any and all Taxes. If any Borrower shall be required
by law to deduct any Taxes from or in respect of any sum payable
hereunder to any Lender, the LC Issuer or the Agent, (a) the sum
payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional
sums payable under this Section 3.5) such Lender, the LC Issuer or
the Agent (as the case may be) receives an amount equal to the sum
it would have received had no such deductions been made, (b) such
Borrower shall make such deductions, (c) such Borrower shall pay
the full amount deducted to the relevant authority in accordance
with applicable law and (d) such Borrower shall furnish to the
Agent the original copy of a receipt evidencing payment thereof
within thirty days after such payment is made.




     (b) In addition, each Borrower hereby agrees to pay any
present or future stamp or documentary taxes and any other excise
or property taxes, charges or similar levies which arise from any
payment made hereunder or under any Note or Facility LC Application
or from the execution or delivery of, or otherwise with respect to,
this Agreement or any Note or Facility LC Application (“Other
Taxes”).




     (c) The Borrower hereby agree to, jointly and severally,
indemnify the Agent, the LC Issuer and each Lender for the full
amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed on amounts payable under this Section
3.5) paid by the Agent, the LC Issuer or such Lender as a result of
its Commitment, any Loans made by it hereunder, any Facility LC
issued hereunder or otherwise in connection with its
participation in this Agreement and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto. Payments due under this indemnification shall be made
within thirty days of the date the Agent, the LC Issuer or such
Lender makes demand therefor pursuant to Section 3.6.




     (d) Each Lender that is not incorporated under the laws of the
U.S. or a state thereof (each a “Non-U.S. Lender”) agrees that it
will, not more than ten Business Days after the date of this
Agreement, (i) deliver to the Agent two duly completed copies of
U.S. Internal Revenue Service Form W-8BEN or W-8ECI, certifying in
either case that such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any U.S. federal
income taxes, and (ii) deliver to the Agent a U.S. Internal Revenue
Form W-8 or W-9, as the case may be, and certify that it is
entitled to an exemption from U.S. backup withholding tax. Each
Non-U.S. Lender further undertakes to deliver to each of the
Borrower Representative and the Agent (x) renewals or additional
copies of such form (or any successor form) on or before the date
that such form expires or becomes obsolete, and (y) after the
occurrence of any event requiring a change in



55









 






the most recent forms
so delivered by it, such additional forms or amendments thereto as
may be reasonably requested by the Borrower Representative or the
Agent. All forms or amendments described in the preceding sentence
shall certify that such Lender is entitled to receive payments
under this Agreement without deduction or withholding of any U.S.
federal income taxes, unless an event (including without limitation
any change in treaty, law or regulation) has occurred prior to the
date on which any such delivery would otherwise be required which
renders all such forms inapplicable or which would prevent such
Lender from duly completing and delivering any such form or
amendment with respect to it and such Lender advises the Borrower
Representative and the Agent that it is not capable of receiving
payments without any deduction or withholding of U.S. federal
income tax.




     (e) For any period during which a Non-U.S. Lender has failed
to provide the Borrower Representative with an appropriate form
pursuant to clause (iv), above (unless such failure is due to a
change in treaty, law or regulation, or any change in the
interpretation or administration thereof by any governmental
authority, occurring subsequent to the date on which a form
originally was required to be provided), such Non-U.S. Lender shall
not be entitled to indemnification under this Section 3.5 with
respect to Taxes imposed by the U.S.; provided that, should a
Non-U.S. Lender which is otherwise exempt from or subject to a
reduced rate of withholding tax become subject to Taxes because of
its failure to deliver a form required under clause (iv), above,
the Borrowers shall take such steps as such Non-U.S. Lender shall
reasonably request to assist such Non-U.S. Lender to recover such
Taxes.




     (f) Any Lender that is entitled to an exemption from or
reduction of withholding tax with respect to payments under this
Agreement or any Note pursuant to the law of any relevant
jurisdiction or any treaty shall deliver to the
Borrower Representative (with a copy to the Agent), at the
time or times prescribed by applicable law, such properly completed
and executed documentation prescribed by applicable law as will
permit such payments to be made without withholding or at a reduced
rate.




     (g) If the U.S. Internal Revenue Service or any other
governmental authority of the U.S. or any other country or any
political subdivision thereof asserts a claim that the Agent did
not properly withhold tax from amounts paid to or for the account
of any Lender (because the appropriate form was not delivered or
properly completed, because such Lender failed to notify the Agent
of a change in circumstances which rendered its exemption from
withholding ineffective, or for any other reason), such Lender
shall indemnify the Agent fully for all amounts paid, directly or
indirectly, by the Agent as tax, withholding therefor, or
otherwise, including penalties and interest, and including taxes
imposed by any jurisdiction on amounts payable to the Agent under
this subsection, together with all costs and expenses related
thereto (including attorneys fees and time charges of attorneys for
the Agent, which attorneys may be employees of the Agent). The



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obligations of the Lenders under this Section 3.5(g) shall survive
the payment of the Obligations and termination of this Agreement.



     3.6 Lender Statements; Survival of Indemnity.



     To the extent reasonably possible, each Lender shall designate an
alternate Lending Installation with respect to its Eurodollar Loans to reduce
any liability of the Borrowers to such Lender under Sections 3.1, 3.2 and 3.5
or to avoid the unavailability of Eurodollar Advances under Section 3.3, so
long as such designation is not, in the judgment of such Lender,
disadvantageous to such Lender. Each Lender shall deliver a written statement
of such Lender to the Borrower Representative (with a copy to the Agent) as to
the amount due, if any, under Section 3.1, 3.2, 3.4 or 3.5. Such written
statement shall set forth in reasonable detail the calculations upon which such
Lender determined such amount and shall be final, conclusive and binding on the
Borrowers in the absence of manifest error. Determination of amounts payable
under such Sections in connection with a Eurodollar Loan shall be calculated as
though each Lender funded its Eurodollar Loan through the purchase of a deposit
of the type and maturity corresponding to the deposit used as a reference in
determining the Eurodollar Rate applicable to such Loan, whether in fact that
is the case or not. Unless otherwise provided herein, the amount specified in
the written statement of any Lender shall be payable on demand after receipt by
the Borrower Representative of such written statement. The obligations of the
Borrowers under Sections 3.1, 3.2, 3.4 and 3.5 shall survive payment of the
Obligations and termination of this Agreement.



     3.7 Replacement of Lender.



     If the Borrowers are required pursuant to Section 3.1, 3.2 or 3.5 to make
any additional payment to any Lender or if any Lender’s obligation to make or
continue, or to convert Floating Rate Advances into, Eurodollar Advances shall
be suspended pursuant to Section 3.3 or if any Lender is a Defaulting Lender
(any such Lender, an “Affected Lender”), the Borrowers may elect, if such
amounts continue to be charged or such suspension is still effective, to
replace such
Affected Lender as a Lender party to this Agreement, provided that, no
Default or Unmatured Default shall have occurred and be continuing at the time
of such replacement, and provided further that, concurrently with such
replacement, (i) another bank or other entity which is reasonably satisfactory
to the Borrowers and the Agent shall agree, as of such date, to purchase for
cash the Advances and other Obligations due to the Affected Lender pursuant to
an Assignment Agreement (and a Defaulting Lender shall be deemed to have
executed and delivered such Assignment Agreement if it fails to do so) and to
become a Lender for all purposes under this Agreement and to assume all
obligations of the Affected Lender to be terminated as of such date and to
comply with the requirements of Section 12.3 applicable to assignments, and
(ii) the Borrowers shall pay to such Affected Lender in same day funds on the
day of such replacement (A) all interest, fees and other amounts then accrued
but unpaid to such Affected Lender by the Borrowers hereunder to and including
the date of termination, including without limitation payments due to such
Affected Lender under Sections 3.1, 3.2 and 3.5, and (B) an amount, if any,
equal to the payment which would have been due to such Lender on the day of
such replacement under Section 3.4 had the Loans of such Affected Lender been
prepaid on such date rather than sold to the replacement Lender.



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ARTICLE IV




CONDITIONS PRECEDENT




     4.1 Effectiveness. This Agreement will not become effective unless the
Loan Parties have satisfied each of the following conditions in a manner
satisfactory to the Agent and the Lenders, and with respect to any condition
requiring delivery of any agreement, certificate, document, or instrument, the
Loan Parties shall have furnished to the Agent sufficient copies of any such
agreement, certificate, document, or instrument for distribution to the
Lenders.




     (a) This Agreement or counterparts hereof shall have been duly
executed by each Loan Party, the Agent and the Lenders; and the
Agent shall have received duly executed copies of the Loan
Documents and such other documents, instruments, agreements and
legal opinions as the Agent shall reasonably request in connection
with the transactions contemplated by this Agreement and the other
Loan Documents, each in form and substance reasonably satisfactory
to the Agent.




     (b) Each Loan Party shall have delivered copies of its
articles or certificate of incorporation or organization, together
with all amendments, and a certificate of good standing, each
certified by the appropriate governmental officer in its
jurisdiction of incorporation or organization.




     (c) Each Loan Party shall have delivered copies, certified by
its Secretary or Assistant Secretary, of its by-laws or operating,
management or partnership agreement and of its Board of Directors’
resolutions or the resolutions of its members and of resolutions or
actions of any other body authorizing the
execution, delivery and performance of the Loan Documents to
which such Loan Party is a party.




     (d) Each Loan Party shall have delivered an incumbency
certificate, executed by its Secretary or Assistant Secretary,
which shall identify by name and title and bear the signatures of
the Authorized Persons and any other officers such Loan Party
authorized to sign the Loan Documents to which such Loan Party is a
party, upon which certificate the Agent and the Lenders shall be
entitled to rely until informed of any change in writing by such
Loan Party.




     (e) Each Borrower and each other Loan Party shall have
delivered a certificate, signed by the chief financial officer of
such Borrower and such other Loan Party, on the initial Credit
Extension Date (i) stating that no Default or Unmatured Default has
occurred and is continuing, (ii) stating that the representations
and warranties contained in Article V are true and correct as of
such Credit Extension Date, (iii) specifying the deposit account at
Bank One which shall be used as the Funding Account and (iv)
certifying any other factual matters as may be reasonably requested
by the Agent or any Lender.



58









 






     (f) The Loan Parties shall have delivered a written opinion of
the Loan Parties’ counsel, addressed to the Agent, the LC Issuer
and the Lenders in substantially the form of Exhibit D.




     (g) The Borrowers shall have delivered any Notes requested by
a Lender pursuant to Section 2.21 payable to the order of each such
requesting Lender.




     (h) The Borrowers shall have delivered money transfer
authorizations as the Agent may have reasonably requested.




     (i) [reserved]




     (j) The Agent shall have received all Lien and other searches
that the Agent deems necessary, the Loan Parties shall have
delivered UCC termination statements or amendments to existing UCC
financing statements with respect to any filings against the
Collateral as may be requested by the Agent and shall have
authorized the filing of such termination statements or amendments,
the Agent shall have been authorized to file any UCC financing
statements that the Agent deems necessary to perfect its Liens in
the Collateral and Liens creating a first priority security
interest in the Collateral in favor of the Agent shall have been
perfected.




     (k) The Borrower Representative shall have delivered an
Aggregate Borrowing Base Certificate which calculates the Aggregate
Borrowing Base as of the end of the Business Day immediately
preceding the Effective Date and each Borrower shall have delivered
a duly executed Borrowing Base Certificate for such Borrower which
calculates such Borrower’s Borrowing Base as of the end of the
Business Day immediately preceding the Effective Date.




     (l) The Borrowers shall have delivered to the Agent and the
Lenders the audited consolidated financial statements of the
Company and its Subsidiaries for the period ending on September 30,
2003 and unaudited consolidated financial statements of the Company
and its Subsidiaries for the period ending on May 31, 2004.




     (m) The Agent shall have completed its business due diligence
and the Loan Parties’ corporate structure, capital structure,
material accounts and governing documents shall be acceptable to
the Agent. In addition, the terms and conditions of all
Indebtedness of each Loan Party shall be acceptable to the Agent.




     (n) All legal (including tax implications) and regulatory
matters, including, but not limited to compliance with applicable
requirements of Regulations U, T and X of the Board of Governors of
the Federal Reserve System, shall be satisfactory to the Agent and
the Lenders.



59









 






     (o) The Loan Parties shall have delivered (i) Collateral
audits, satisfactory to the Agent, prepared by an independent firm
engaged directly by the Agent, and (ii) appraisals, prepared by an
independent appraiser engaged directly by the Agent, of specific
equipment, which audits and appraisals shall be satisfactory to the
Agent.




     (p) The Loan Parties shall have delivered any requested
environmental review reports from firm(s) satisfactory to the
Agent, which review reports shall be acceptable to the Agent. Any
environmental hazards or liabilities identified in any such
environmental review reports shall indicate the Loan Parties’ plans
with respect thereto.




     (q) The Borrowers shall have delivered evidence of insurance
coverage in form, scope, and substance reasonably satisfactory to
the Agent and otherwise in compliance with the terms of Section
6.7.




     (r) Reserved.




     (s) Reserved.




     (t) The Agent shall have determined that (i) since May 13,
2004, there is an absence of any material adverse change or
disruption in primary or secondary loan syndication markets,
financial markets or in capital markets generally that would likely
impair syndication of the Credit Extensions hereunder and (ii) the
Loan Parties shall have fully cooperated with the Agent’s
syndication efforts including, without limitation, by providing the
Agent with information regarding the Loan Parties’ operations and
prospects and such other information as the Agent deems necessary
to successfully syndicate the Credit Extensions hereunder.




     (u) The Borrowers shall have delivered a properly completed
Facility LC Application if the initial Credit Extension will
include the issuance of a Facility LC. The Borrowers shall have
executed the LC Issuer’s master agreement for the issuance of
Letters of Credit.




     (v) After giving effect to all Credit Extensions to be made on
the Effective Date and payment of all fees and expenses due
hereunder, and with all of the Loan Parties’ indebtedness,
liabilities, and obligations current, the Borrowers’ Availability
shall not be less than $20,000,000.




     (w) The Borrowers shall have paid all of the fees and expenses
owing to the Agent, the Arranger, the LC Issuer and the Lenders
pursuant to Section 2.10, and Section 9.6(a).




     (x) The Loan Parties shall have delivered to the Agent their
most recent statement of the Unfunded Liabilities of each Single
Employer Plan, certified as correct by an actuary enrolled under
ERISA.



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     (y) The Agent shall have received evidence that the Borrower
has delivered notice under the Indenture of their intention to
repurchase all of the outstanding Convertible Notes and terminate
the Indenture.




     (z) The Loan Parties shall have delivered such other documents
as the Agent, the LC Issuer, any Lender or their respective counsel
may have reasonably requested.



     4.2 Each Credit Extension. Except as otherwise expressly provided herein,
the Lenders shall not be required to make any Credit Extension if on the
applicable Credit Extension Date:




     (a) There exists any Default or Unmatured Default or any
Default or Unmatured Default shall result from any such Credit
Extension and the Agent or the Required Lenders shall have
determined not to make any Credit Extension as a result of such
Default or Unmatured Default.




     (b) Any representation or warranty contained in Article V is
untrue or incorrect as of such Credit Extension Date except to the
extent any such representation or warranty is stated to relate
solely to an earlier date, and the Agent or the Required Lenders
shall have determined not to make any Credit Extension as a result
of the fact that such representation or warranty is untrue or
incorrect.




     (c) After giving effect to any Credit Extension, the
Borrowers’ Availability would be less than zero.



     Each Borrowing Notice or request for issuance of Facility LC with respect
to each such Credit Extension shall constitute a representation and warranty by
each Borrower that the
conditions contained in Section 4.1 have been satisfied and that none of
the conditions set forth in Section 4.2 exist as of the applicable Credit
Extension Date. Any Lender may require a duly completed Compliance Certificate
as a condition to making a Credit Extension.



ARTICLE V




REPRESENTATIONS AND WARRANTIES




     Each Loan Party represents and warrants to the Lenders as follows:



     5.1 Existence and Standing. Each Loan Party is a corporation, partnership
(in the case of Subsidiaries only) or limited liability company duly and
properly incorporated or organized, as the case may be, validly existing and
(to the extent such concept applies to such entity) in good standing under the
laws of its jurisdiction of incorporation or organization and has all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted (except for jurisdictions other than its jurisdiction of
incorporation or organization where such authority may be retroactively and
ministerially obtained and where failure to have such authority could not
reasonably be expected to have a Material Adverse Effect).



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     5.2 Authorization and Validity. Each Loan Party has the power and
authority and legal right to execute and deliver the Loan Documents to which it
is a party and to perform its obligations thereunder. The execution and
delivery by each Loan Party of the Loan Documents to which it is a party and
the performance of its obligations thereunder have been duly authorized by
proper proceedings, and the Loan Documents to which such Loan Party is a party
constitute legal, valid and binding obligations of such Loan Party enforceable
against such Loan Party in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally.



     5.3 No Conflict; Government Consent. Neither the execution and delivery
by any Loan Party of the Loan Documents to which it is a party, nor the
consummation of the transactions therein contemplated, nor compliance with the
provisions thereof will violate (i) any law, rule, regulation, order, writ,
judgment, injunction, decree or award binding on such Loan Party or (ii) any
Loan Party’s articles or certificate of incorporation, partnership agreement,
certificate of partnership, articles or certificate of organization, by-laws,
or operating or other management agreement, as the case may be, or (iii) the
provisions of any material indenture, instrument or agreement to which any Loan
Party is a party or is subject, or by which it, or its Property, is bound, or
conflict with or constitute a default thereunder, or result in, or require, the
creation or imposition of any Lien in, of or on the Property of such Loan Party
pursuant to the terms of any such indenture, instrument or agreement. No
order, consent, adjudication, approval, license, authorization, or validation
of, or filing, recording or registration with, or exemption by, or other action
in respect of any governmental or public body or authority, or any subdivision
thereof, which has not been
obtained by a Loan Party, is required to be obtained by any Loan Party in
connection with the execution and delivery of the Loan Documents, the
borrowings under this Agreement, the payment and performance by the Loan
Parties of the Obligations or the legality, validity, binding effect or
enforceability of any of the Loan Documents.



     5.4 Security Interest in Collateral. The provisions of this Agreement and
the other Loan Documents create legal and valid Liens on all the Collateral in
favor of the Agent, for the benefit of the Agent and the Lenders, and such
Liens constitute perfected and continuing Liens on the Collateral, securing the
Obligations, enforceable against the applicable Loan Party and all third
parties, and having priority over all other Liens on the Collateral except in
the case of (a) Permitted Liens, to the extent any such Permitted Liens would
have priority over the Liens in favor of the Agent pursuant to any applicable
law or agreement and (b) Liens perfected only by possession (including
possession of any certificate of title) to the extent the Agent has not
obtained or does not maintain possession of such Collateral.



     5.5 Financial Statements.




     (a) The audited consolidated financial statements of the
Company and its Subsidiaries for the period ending on September 30,
2003 heretofore delivered to the Lenders were prepared in
accordance with GAAP (as in effect on the date such statements were
prepared) and fairly present the consolidated financial condition
and operations of the Company and its Subsidiaries at such date and
the consolidated results of their operations for the period then
ended. The unaudited consolidated financial statements of the
Company and its Subsidiaries for the Fiscal Month ended May 31,
2004 heretofore delivered by the Borrowers to the



62









 






Lenders were
prepared in accordance with GAAP (as in effect on the date such
statements were prepared except for the presentation of footnotes
and for applicable normal year-end audit adjustments) and fairly
present the consolidated financial condition and operations of the
Company and its Subsidiaries at such date and the consolidated
results of their operations for the period then ended.




     (b) The Projections dated June 24, 2004 and the most recent
Projections delivered to the Agent and the Lenders pursuant to
Section 6.1(d), represent the Borrowers’ good faith estimate of the
future financial performance of the Borrowers for the period set
forth therein.



     5.6 Material Adverse Change. Since September 30, 2003 there has been no
change in the business, Property, prospects, condition (financial or otherwise)
or results of operations of the Loan Parties which could reasonably be expected
to have a Material Adverse Effect.



     5.7 Taxes. The Loan Parties have filed all U.S. federal tax returns and
all other tax returns which are required to be filed and have paid all taxes
due pursuant to said returns or pursuant to any
assessment received by any Loan Party, except such taxes, if any, as are
being contested in good faith and as to which adequate reserves have been
provided in accordance with GAAP and as to which no Lien exists. The U.S.
income tax returns of the Loan Parties have been audited by the Internal
Revenue Service through the Fiscal Year ended 2001. No tax liens have been
filed and no claims are being asserted with respect to any such taxes. The
charges, accruals and reserves on the books of the Loan Parties in respect of
any taxes or other governmental charges are adequate. If any Loan Party is a
limited liability company, each such limited liability company qualifies for
partnership tax treatment under U.S. federal tax law.



     5.8 Litigation and Contingent Obligations. Except as set forth on
Schedule 5.8, there is no litigation, arbitration, governmental investigation,
proceeding or inquiry pending or, to the knowledge of any of their officers,
threatened against or affecting any Loan Party which could reasonably be
expected to have a Material Adverse Effect or which seeks to prevent, enjoin or
delay the making of any Credit Extensions. Other than any liability incident
to any litigation, arbitration or proceeding which (i) could not reasonably be
expected to have a Material Adverse Effect or (ii) is set forth on Schedule
5.8, no Loan Party has any material contingent obligations not provided for or
disclosed in the financial statements referred to in Section 5.5.



     5.9 Capitalization and Subsidiaries. Schedule 5.9 sets forth (a) a
correct and complete list of the name and relationship to the Company of each
and all of the Company’s Subsidiaries, (b) the location of the chief executive
office of each Loan Party and each of its Subsidiaries and each other location
where any of them have maintained their chief executive office in the past five
years, (c) a true and complete listing of each class of each Loan Party’s
authorized Capital Stock, of which all of such issued shares are validly
issued, outstanding, fully paid and non-assessable, and (d) the type of entity
of each Loan Party. With respect to each Loan Party, Schedule 5.9 also sets
forth the employer or taxpayer identification number of each Loan Party and the
organizational identification number issued by each Loan Party’s jurisdiction
of organization or a statement that no such number has been issued. All of the
issued and outstanding Capital Stock owned by any Loan Party has been (to the
extent such concepts are



63









 




relevant with respect to such ownership interests)
duly authorized and issued and is fully paid and non-assessable.




     5.10 ERISA. The Unfunded Liabilities of all Single Employer Plans do not
in the aggregate exceed $1,000,000. Neither the Company nor any other member
of the Controlled Group has incurred, or is reasonably expected to incur, any
withdrawal liability to Multiemployer Plans in excess of $1,000,000 in the
aggregate. Each Plan complies in all material respects with all applicable
requirements of law and regulations, no Reportable Event has occurred with
respect to any Plan, neither the Company nor any other member of the Controlled
Group has withdrawn from any Plan or initiated steps to do so, and no steps
have been taken to reorganize or terminate any Plan.



     5.11 Accuracy of Information. No information, exhibit or report furnished by
any Loan Party to the
Agent or to any Lender in connection with the negotiation of, or compliance
with, the Loan Documents contained any material misstatement of fact or omitted
to state a material fact or any fact necessary to make the statements contained
therein not misleading.



     5.12 Names; Prior Transactions. Except as set forth on Schedule 5.12, the
Loan Parties have not, during the past five years, been known by or used any
other corporate or fictitious name, or been a party to any merger or
consolidation, or been a party to any Acquisition.



     5.13 Regulation U. No Loan Party is engaged, nor will it engage,
principally or as one of its important activities, in the business of extending
credit for the purpose of “purchasing” or “carrying” any “margin stock” as such
terms are defined in Regulation U of the Federal Reserve Board as now and from
time to time hereafter in effect (such securities being referred to herein as
“Margin Stock”). No Loan Party owns any Margin Stock, and none of the proceeds
of the Loans or other extensions of credit under this Agreement will be used,
directly or indirectly, for the purpose of purchasing or carrying any Margin
Stock, for the purpose of reducing or retiring any Indebtedness that was
originally incurred to purchase or carry any Margin Stock or for any other
purpose that might cause any of the Loans or other extensions of credit under
this Agreement to be considered a “purpose credit” within the meaning of
Regulations T, U or X of the Federal Reserve Board. No Loan Party will take or
permit to be taken any action that might cause any Loan Document to violate any
regulation of the Federal Reserve Board.



     5.14 Material Agreements. Schedule 5.14 hereto sets forth as of the
Closing Date all material agreements and contracts to which any Loan Party is a
party or is bound as of the date hereof that were executed after March 31, 2004
or that are not listed in any public filing with the Securities and Exchange
Commission. No Loan Party is subject to any charter or other corporate
restriction which could reasonably be expected to have a Material Adverse
Effect. No Loan Party is in default in the performance, observance or
fulfillment of any of the obligations, covenants or conditions contained in any
material agreement to which it is a party (including any such agreement or
instrument evidencing or governing Indebtedness).



     5.15 Compliance With Laws. The Loan Parties have complied with all
applicable statutes, rules, regulations, orders and restrictions of any
domestic or foreign government or any instrumentality or agency thereof having
jurisdiction over the conduct of their respective



64









 




businesses or the ownership
of their respective Property, except for any failure to comply with any of the
foregoing which could not reasonably be expected to have a Material Adverse
Effect.




     5.16 Ownership of Properties. Except as set forth on Schedule 5.16, on the date of this Agreement,
the Loan Parties will have in all material respects good title, free of all
Liens other than those permitted by Section 6.22, to all of the Property and
assets reflected in the Loan Parties’ most recent consolidated financial
statements provided to the Agent as owned by the Loan Parties.



     5.17 Plan Assets; Prohibited Transactions. No Loan Party is an entity
deemed to hold “plan assets” within the meaning of 29 C.F.R. § 2510.3-101 of an
employee benefit plan (as defined in Section 3(3) of ERISA) which is subject to
Title I of ERISA or any plan (within the meaning of Section 4975 of the Code),
and neither the execution of this Agreement nor the making of Credit Extensions
hereunder gives rise to a prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Code.



     5.18 Environmental Matters. In the ordinary course of its business, the
officers of each Loan Party consider the effect of Environmental Laws on the
business of such Loan Party, in the course of which they identify and evaluate
potential risks and liabilities accruing to such Loan Party due to
Environmental Laws. On the basis of this consideration, the Loan Parties have
concluded that Environmental Laws cannot reasonably be expected to have a
Material Adverse Effect. No Loan Party has received any notice to the effect
that its operations are not in material compliance with any of the requirements
of applicable Environmental Laws or are the subject of any federal or state
investigation evaluating whether any remedial action is needed to respond to a
release of any toxic or hazardous waste or substance into the environment.



     5.19 Investment Company Act. No Loan Party is an “investment company” or
a company “controlled” by an “investment company”, within the meaning of the
Investment Company Act of 1940, as amended.



     5.20 Public Utility Holding Company Act. No Loan Party is a “holding
company” or a “subsidiary company” of a “holding company”, or an “Affiliate” of
a “holding company” or of a “subsidiary company” of a “holding company”, within
the meaning of the Public Utility Holding Company Act of 1935, as amended.



     5.21 Bank Accounts. As of the Closing Date, Exhibit B to the Security
Agreement contains a complete and accurate list of all bank accounts maintained
by each Loan Party with any bank or other financial institution.



     5.22 Indebtedness. As of the Closing Date and after giving effect to the Credit Extensions
to be made on the Closing Date (if any), the Loan Parties have no Indebtedness,
except for (a) the Obligations, and (b) any Indebtedness described on Schedule
5.22.



     5.23 Affiliate Transactions. Except as set forth on Schedule 5.23, as of
the Closing Date, there are no existing or proposed agreements, arrangements,
understandings, or transactions between any Loan Party and any of the officers,
members, managers, directors, parents, other interest holders, employees, or
Affiliates (other than Subsidiaries) of any Loan Party, any holder of five
percent (5%) or more of the Capital Stock of any Loan Party, or any



65









 




members of
any of the foregoing Persons’ respective immediate families, and none of the
foregoing Persons are directly or indirectly indebted to or have any direct or
indirect ownership, partnership, or voting interest in any Affiliate of any
Loan Party or any Person with which any Loan Party has a business relationship
or which competes with any Loan Party.




     5.24 Real Property; Leases. As of the Closing Date, Schedule 5.24 sets
forth a correct and complete list of all real Property owned by each Loan
Party, all leases and subleases of real Property by each Loan Party as lessee
or sublessee, and all leases and subleases of real Property by each Loan Party
as lessor or sublessor. Each of such leases and subleases is valid and
enforceable in accordance with its terms and is in full force and effect, and
no material default by any Loan Party thereto or, to any Loan Party’s
knowledge, any other party to any such lease or sublease exists. Each Loan
Party has good and indefeasible title in fee simple to the real Property
identified on Schedule 5.24 as owned by such Loan Party, or valid leasehold
interests in all real Property designated therein as “leased” by such Loan
Party.



     5.25 Intellectual Property Rights. As of the Closing Date: (a) Schedule
5.25 sets forth a correct and complete list of all Intellectual Property Rights
of each Loan Party; (b) none of the Intellectual Property Rights listed in
Schedule 5.25 is subject to any licensing agreement or similar arrangement
except as set forth in Schedule 5.25; (c) the Intellectual Property Rights
described in Schedule 5.25 constitute all of the property of such type
necessary to the current and anticipated future conduct of the Loan Parties’
business; (d) to the best of each Loan Party’s knowledge, no slogan or other
advertising device, product, process, method, substance, part, or other
material now employed, or now contemplated to be employed, by any Loan Party
infringes in any material respect upon any rights held by any other Person; and
(e) no claim or litigation regarding any of the foregoing is pending or, to any
Loan Party’s knowledge, threatened, and no patent, invention, device,
application, principle or any statute, law, rule, regulation, standard, or code
is pending or, to the knowledge of any Loan Party, proposed which could
reasonably be expected to have a material adverse effect on such Loan Party.



     5.26 Insurance. Schedule 5.26 lists all insurance policies of any nature
maintained, as of the Closing Date, by each Loan Party, as well as a summary of
the terms of each such policy.



     5.27 Solvency.




     (a) Immediately after the consummation of the transactions to
occur on the date hereof and immediately following the making of
each Credit Extension, if any, made on the date hereof and after
giving effect to the application of the proceeds of such Credit
Extensions, (a) the fair value of the assets of each Loan Party, at
a fair valuation, will exceed the debts and liabilities,
subordinated, contingent or otherwise, of each Loan Party; (b) the
present fair saleable value of the Property of each Loan Party will
be greater than the amount that will be required to pay the
probable liability of each Loan Party on its debts and other
liabilities, subordinated, contingent or otherwise, as such debts
and other liabilities become absolute and matured; (c) each Loan
Party will be able to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become
absolute and matured; and (d) each Loan Party will not have
unreasonably small capital with which to conduct the businesses in
which it



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is engaged as such businesses are now conducted and are
proposed to be conducted after the date hereof.




     (b) No Borrower intends to, nor will any Borrower permit any
of its Subsidiaries to, and no Borrower believes that it or any of
its Subsidiaries will, incur debts beyond its ability to pay such
debts as they mature, taking into account the timing of and amounts
of cash to be received by it or any such Subsidiary and the timing
of the amounts of cash to be payable on or in respect of its
Indebtedness or the Indebtedness of any such Subsidiary.



     5.28 Subordinated Indebtedness. The Secured Obligations constitute senior
indebtedness which is entitled to the benefits of the subordination provisions
of all outstanding Subordinated Indebtedness.



     5.29 Post-Retirement Benefits. The present value of the expected cost of
post-retirement medical and insurance benefits payable by each Loan Party to
its employees and former employees, as estimated by such Loan Party in
accordance with procedures and assumptions deemed reasonable by the Required
Lenders, does not exceed $500,000.



     5.30 Common Enterprise. The successful operation and condition of each of
the Loan Parties is dependent on the continued successful performance of the
functions of the group of the Loan Parties as a whole and the successful
operation of each of the Loan Parties is dependent on the successful
performance and operation of each other Loan Party. Each Loan Party expects to
derive benefit (and its board of directors or other governing body has
determined that it may reasonably be expected to derive benefit), directly and
indirectly, from (i) successful operations of each of the other Loan Parties
and (ii) the credit extended by the Lenders to the Borrowers hereunder, both in
their separate capacities and as members of the group of companies. Each Loan
Party has determined that execution, delivery, and performance of this
Agreement and any other Loan
Documents to be executed by such Loan Party is within its purpose, will be
of direct and indirect benefit to such Loan Party, and is in its best interest.



     5.31 Reportable Transaction. The Borrowers do not intend to treat the
Advances and related transactions as being a “reportable transaction” (within
the meaning of Treasury Regulation Section 1.6011-4). In the event a Borrower
determines to take any action inconsistent with such intention, it will
promptly notify the Agent thereof.



     5.32 Labor Disputes. Except as set forth on Schedule 5.32, as of the
Closing Date (a) there is no collective bargaining agreement or other labor
contract covering employees of the Borrower or any of its Subsidiaries, (b) no
such collective bargaining agreement or other labor contract is scheduled to
expire during the term of this Agreement, (c) no union or other labor
organization is seeking to organize, or to be recognized as, a collective
bargaining unit of employees of the Borrower or any of its Subsidiaries or for
any similar purpose, and (d) there is no pending or (to the best of the
Borrower’s knowledge) threatened, strike, work stoppage, material unfair labor
practice claim, or other material labor dispute against or affecting the
Borrower or its Subsidiaries or their employees.



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ARTICLE VI




COVENANTS




     Each Loan Party executing this Agreement jointly and severally agrees as
to all Loan Parties that from and after the date hereof and until the Facility
Termination Date:



     6.1 Financial and Collateral Reporting. Each Loan Party will maintain,
for itself and each Subsidiary, a system of accounting established and
administered in accordance with GAAP, and will furnish to the Lenders:




     (a) within ninety days after the close of each Fiscal Year of
the Company and its Subsidiaries, an unqualified audit report
certified by independent certified public accountants acceptable to
the Required Lenders, prepared in accordance with GAAP on a
consolidated and consolidating basis (consolidating statements need
not be certified by such accountants), including balance sheets as
of the end of such Fiscal Year, related profit and loss and
reconciliation of surplus statements, and a statement of cash
flows, accompanied by (i) any management letter prepared by said
accountants and (ii) a certificate of said accountants that, in the
course of their examination necessary for their certification of
the foregoing, they have obtained no knowledge of any Default or
Unmatured Default, or if, in the opinion of such accountants, any
Default or Unmatured Default shall exist, stating the nature and
status thereof;




     (b) within forty-five days after the close of the first three
quarterly periods of each Fiscal Year of the Company and its
Subsidiaries, consolidated unaudited balance sheets as at the close
of each such Fiscal Quarter and consolidated profit and loss and
reconciliation of surplus statements and a statement of cash flows
for the period from the beginning of the applicable Fiscal Year to
the end of such Fiscal Quarter, all certified by its chief
financial officer and prepared in accordance with GAAP (except for
exclusion of footnotes and subject to normal year-end audit
adjustments);




     (c) within thirty days after the close of each Fiscal Month of
the Company and its Subsidiaries, consolidated unaudited balance
sheets as at the close of each such Fiscal Month and consolidated
profit and loss and reconciliation of surplus statements and a
statement of cash flows for the period from the beginning of the
applicable Fiscal Year to the end of such Fiscal Month, all
prepared in accordance with GAAP (except for exclusion of footnotes
and subject to normal year-end audit adjustments) and certified by
its chief financial officer;




     (d) as soon as available, but in any event not more than 60
days prior to the end of each Fiscal Year of the Company, but not
less than 30 days prior to the end of such Fiscal Year, a copy of
the plan and forecast (including a projected consolidated and
consolidating balance sheet, income statement and funds flow



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statement) of the Company for each quarter of such Fiscal Year (the
“Projections”) in form reasonably satisfactory to the Agent;




     (e) together with each of the financial statements required
under Sections 6.1(a) and (c), a compliance certificate in
substantially the form of Exhibit E (a “Compliance Certificate”)
signed by the chief financial officer of the Borrower
Representative showing the calculations necessary to determine
compliance with this Agreement and stating that no Default or
Unmatured Default exists, or if any Default or Unmatured Default
exists, stating the nature and status thereof.




     (f) as soon as available but in any event within 20 days of
the end of each calendar month, at such other times as may be
necessary to re-determine availability of Advances hereunder or as
may be requested by the Agent, as of the period then ended, an
Aggregate Borrowing Base Certificate, together with a duly executed
Borrowing Base Certificate for each Borrower which calculates such
Borrower’s Borrowing Base, and supporting information in connection
therewith;




     (g) as soon as available but in any event within 20 days of
the end of each Fiscal Month and at such other times as may be
requested by the Agent, as of the period then ended:




     (i) a summary aging of the Accounts of each Borrower
owing by each of such Borrower’s Account Debtors and, if
requested by Agent, a detailed aging of each Borrower’s
Accounts including all invoices aged by
invoice or due date, in either case reconciled to each
such Borrower’s Borrowing Base Certificate delivered as of
such date prepared in a manner reasonably acceptable to the
Agent;




     (ii) a schedule detailing each Borrower’s Inventory, in
form satisfactory to the Agent, (1) by class (raw material,
work-in-process and finished goods), by product type, and by
volume on hand, which Inventory shall be valued at the lower
of cost (determined on a first-in, first-out basis or average
cost basis) or market and (2) reconciled to each such
Borrower’s Borrowing Base Certificate delivered as of such
date prepared in a manner reasonably acceptable to the Agent;




     (iii) a worksheet of calculations prepared by each
Borrower to determine Eligible Accounts and Eligible
Inventory, such worksheets detailing the Accounts and
Inventory excluded from Eligible Accounts and Eligible
Inventory and the reason for such exclusion;




     (iv) a reconciliation of each Borrower’s Accounts and
Inventory between the amounts shown in such Borrower’s
general ledger and financial statements and the reports
delivered pursuant to clauses (i) and (ii) above; and



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     (v) a reconciliation of the loan balance per each
Borrower’s general ledger to the loan balance under this
Agreement.




     (h) as soon as available but in any event within 20 days of
the end of each Fiscal Month and at such other times as may be
requested by the Agent, as of the month then ended, a schedule and
aging of the Borrowers’ accounts payable;




     (i) promptly upon the Agent’s request:




     (i) copies of invoices in connection with the invoices
issued by the Borrowers in connection with any Accounts,
credit memos, shipping and delivery documents, and other
information related thereto;




     (ii) copies of purchase orders, invoices, and shipping
and delivery documents in connection with any Inventory or
Equipment purchased by any Loan Party; and




     (iii) a schedule detailing the balance of all
intercompany accounts of the Loan Parties;




     (j) as soon as possible and in any event within thirty (30)
days of filing thereof, copies of all tax returns filed by any Loan
Party with the U.S. Internal Revenue Service (without schedules and
other attachments thereto, unless otherwise requested by Agent);




     (k) as soon as possible and in any event within two-hundred
and seventy days after the close of the Fiscal Year of the Company,
a statement of the Unfunded Liabilities of each Single Employer
Plan, certified as correct by an actuary enrolled under ERISA;




     (l) as soon as possible and in any event within ten days after
any Borrower knows that any Reportable Event has occurred with
respect to any Plan, a statement, signed by the chief financial
officer of such Borrower, describing said Reportable Event and the
action which such Borrower proposes to take with respect thereto;




     (m) as soon as possible and in any event within thirty (30)
days of filing therewith with the PBGC, the U.S. Internal Revenue
Service or any other governmental entity, a copy of each annual
report or other filing with respect to any Plan;




     (n) as soon as possible and in any event within ten days after
receipt by any Loan Party, a copy of (i) any notice or claim to the
effect that any Loan Party is or may be liable to any Person as a
result of the release by any Loan Party, or any other Person of any
toxic or hazardous waste or substance into the environment, and
(ii) any notice alleging any violation of any federal, state or
local environmental, health or safety law or regulation by the any
Loan Party;



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     (o) [reserved];




     (p) concurrently with the furnishing thereof to the
shareholders of the Borrowers, copies of all financial statements,
reports and proxy statements so furnished;




     (q) promptly upon the filing thereof, copies of all
registration statements and annual, quarterly, monthly or other
regular reports which any Loan Party files with the Securities and
Exchange Commission;




     (r) as soon as possible and in any event within 20 days after
the end of each calendar month, a detailed listing of all advances
of proceeds of Loans made by the Borrower Representative to each
Borrower during the immediately preceding calendar month and a
detailed listing of all intercompany loans made by the Borrowers
during such calendar month;




     (s) upon the request of Agent, a certificate of good standing
for each Loan Party from the appropriate governmental officer in
its jurisdiction of incorporation, formation, or organization; and




     (t) such other information (including non-financial
information) as the Agent or any Lender may from time to time
reasonably request.



     6.2 Use of Proceeds.




     (a) The Borrowers will use the proceeds of the Credit
Extensions (i) to repay the outstanding indebtedness, liabilities
and obligations under the Prior Agreement, (ii) for general
corporate purposes (not otherwise prohibited by this Agreement),
(iii) for the Convertible Note Repurchase and (iv) for Permitted
Acquisitions.




     (b) No Loan Party will use any of the proceeds of the Credit
Extensions to (i) purchase or carry any Margin Stock in violation
of Regulation U, (ii) repay or refinance any Indebtedness of any
Person incurred to buy or carry any Margin Stock, (iii) acquire any
security in any transaction that is subject to Section 13 or
Section 14 of the Securities Exchange Act of 1934 (and the
regulations promulgated thereunder), or (iv) make any Acquisition
other than the Convertible Note Repurchase or Permitted
Acquisitions.



     6.3 Notices. Each Loan Party will give prompt notice in writing to the
Agent and the Lenders of:




     (a) the occurrence of any Default or Unmatured Default;




     (b) any other development, financial or otherwise, which could
reasonably be expected to have a Material Adverse Effect;



71









 






     (c) the assertion by the holder of any Capital Stock of any
Loan Party or the holder of any Indebtedness of any Loan Party in
excess of $1,000,000 that any default exists with respect thereto
or that any Loan Party is not in compliance therewith;




     (d) receipt of any written notice that any Loan Party is
subject to any investigation by any governmental entity with
respect to any potential or alleged violation of any applicable
Environmental Law or of imposition of any Lien against any Property
of any Loan Party for any liability with respect to damages arising
from, or costs resulting from, any violation of any Environmental
Laws;




     (e) receipt of any notice of litigation commenced or
threatened against any Loan Party that (i) seeks damages in excess
of $1,000,000, (ii) seeks injunctive relief, (iii) is asserted or
instituted against any Plan, its fiduciaries or its assets, (iv)
alleges criminal misconduct by any Loan Party, (v) alleges the
violation of any law regarding, or seeks remedies in connection
with, any Environmental Laws; or (vi) involves any product recall;




     (f) any Lien (other than Permitted Liens) or claim made or
asserted against any of the Collateral;




     (g) its decision to change, (i) such Loan Party’s name or type
of entity, (ii) such Loan Party’s articles or certificate of
incorporation, partnership agreement, certificate of partnership,
articles or certificate of organization, by-laws, or operating or
other management agreement, and (iii) the location where
any Collateral is held or maintained, if the new location is
not identified on Exhibit A to the Security Agreement or is a
location for which Agent has not received a Collateral Access
Agreement; provided that, in no event shall the Agent receive
notice of such change less than thirty days prior thereto;




     (h) commencement of any proceedings contesting any tax, fee,
assessment, or other governmental charge in excess of $1,000,000;




     (i) the opening of any new deposit account by any Loan Party
with any bank or other financial institution;




     (j) any loss, damage, or destruction to the Collateral in the
amount of $1,000,000 or more, whether or not covered by insurance;




     (k) any and all default notices received under or with respect
to any leased location or public warehouse where Collateral is
located (which shall be delivered within two Business Days after
receipt thereof);




     (l) all material amendments to real estate leases, together
with a copy of each such amendment;



72









 






     (m) immediately after becoming aware of any pending or
threatened strike, work stoppage, unfair labor practice claim, or
other labor dispute affecting the Borrower or any of its
Subsidiaries in a material manner;




     (n) evidence of payment of monthly lease or rental payments as
to each leased or rented location for which a landlord or bailee
waiver has not been obtained (which shall be delivered within three
Business Days after payment thereof);




     (o) the fact that such Loan Party has entered into a Rate
Management Transaction or an amendment to a Rate Management
Transaction, together with copies of all agreements evidencing such
Rate Management Transactions or amendments thereto (which shall be
delivered within two Business Days);




     (p) any amendment, modification, non-renewal, default under or
termination of any Material License or the acquisition by any Loan
Party of any license after the Closing Date; and




     (q) any other matter as the Agent may reasonably request.



     6.4 Conduct of Business. Each Loan Party will:



     (a) carry on and conduct its business in substantially the
same manner and in substantially the same fields of enterprise as
it is presently conducted;



     (b) do all things necessary to remain duly incorporated or
organized, validly existing and (to the extent such concept applies
to such entity) in good standing as a domestic corporation,
partnership or limited liability company in its jurisdiction of
incorporation or organization, as the case may be, and maintain all
requisite authority to conduct its business in each jurisdiction in
which its business is conducted (except for jurisdictions other
than its jurisdiction of incorporation or organization where such
authority may be retroactively and ministerially obtained and where
failure to have such authority could not reasonably be expected to
have a Material Adverse Effect);



     (c) keep adequate books and records with respect to its
business activities in which proper entries, reflecting all
financial transactions, are made in accordance with GAAP and on a
basis consistent with the Financial Statements delivered to the
Agent pursuant to Section 4.1(m);



     (d) at all times maintain, preserve and protect all of its
assets and properties used or useful in the conduct of its
business, and keep the same in good repair, working order and
condition in all material respects (taking into consideration
ordinary wear and tear) and from time to time make, or cause to be
made, all necessary or appropriate repairs, replacements and
improvements thereto consistent with industry practices; and



73









 





     (e) transact business only in such corporate and trade names
as are set forth in Schedule 5.12.



     6.5 Taxes. Each Loan Party will timely file complete and correct U.S.
federal and applicable foreign, state and local tax returns required by law and
pay before delinquent all taxes, assessments and governmental charges and
levies upon it or its income, profits, Property or Collateral, except those
which are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside in accordance with GAAP.
At any time that any Loan Party is organized as a limited liability company,
each such limited liability company will qualify for partnership tax treatment
under U.S. federal tax law.



     6.6 Payment of Indebtedness and Other Liabilities. Each Loan Party will
pay or discharge when due all Material Indebtedness permitted by Section 6.17
owed by such Loan Party and all other liabilities and obligations due to
materialmen, mechanics, carriers, warehousemen, and landlords, except that the
Loan Parties may in good faith contest, by appropriate proceedings diligently
pursued, any such obligations; provided that, (a) adequate reserves have been
set aside for such liabilities in accordance with GAAP, (b) such liabilities
would not result in aggregate liabilities in excess of $1,000,000, (c) no Lien
shall be imposed to secure payment of such liabilities that is superior to the
Agent’s Liens securing the Secured Obligations, (d) none of the Collateral
becomes subject to forfeiture or loss as a result of the contest and (e) such
Loan Party shall promptly pay or discharge such contested liabilities, if any,
and shall deliver to the Agent evidence reasonably acceptable to the Agent of
such compliance, payment or discharge, if such contest is terminated or
discontinued adversely to such Loan Party or the conditions set forth in this
proviso are no longer met.



     6.7 Insurance.




     (a) Each Loan Party shall at all times maintain, with
financially sound and reputable carriers having a Financial
Strength rating of at least A+ by A.M. Best Company, insurance
against: (i) loss or damage by fire and loss in transit; (ii)
theft, burglary, pilferage, larceny, embezzlement, and other
criminal activities; (iii) business interruption; (iv) general
liability and (v) and such other hazards, as is customary in the
business of such Loan Party. All such insurance shall be in
amounts, cover such assets and be under policies acceptable to the
Agent in its Permitted Discretion. In the event any Collateral is
located in any area that has been designated by the Federal
Emergency Management Agency as a “Special Flood Hazard Area,” the
applicable Loan Party shall purchase and maintain flood insurance
on such Collateral (including any personal Property which is
located on any real Property leased by such Loan Party within a
“Special Flood Hazard Area”). The amount of all insurance required
by this Section shall at a minimum comply with applicable law,
including the Flood Disaster Protection Act of 1973, as amended.
All premiums on such insurance shall be paid when due by the
applicable Loan Party, and copies of the policies delivered to the
Agent. If any Loan Party fails to obtain any insurance as required
by this Section, the Agent at the direction of the Required Lenders
may obtain such insurance at the Borrowers’ expense. By purchasing
such insurance, the Agent shall not be deemed to have waived any
Default or Unmatured Default arising from any Loan



74









 






Party’s failure
to maintain such insurance or pay any premiums therefor. No Loan
Party will use or permit any Property to be used in violation of
applicable law or in any manner which might render inapplicable any
insurance coverage.




     (b) All insurance policies required under Section 6.7(a) shall
name the Agent (for the benefit of the Agent and the Lenders) as an
additional insured or as loss payee, as applicable, and shall
provide that, or contain loss payable clauses or mortgagee clauses,
in form and substance satisfactory to the Agent, which provide
that:




     (i) all proceeds thereunder with respect to any
Collateral shall be payable to the Agent;




     (ii) no such insurance shall be affected by any act or
neglect of the insured or owner of the Property described in
such policy; and




     (iii) such policy and loss payable clauses may be
canceled, amended, or terminated only upon at least thirty
days prior written notice given to the Agent.




     (c) The Borrowers must give the Agent prior written notice of
any change in insurance carriers and any new insurance policy shall
comply with the
provisions of this Section 6.7 and otherwise be acceptable to
the Agent. Without in any way limiting the foregoing, in no event
shall the Borrowers change their insurance carrier without first
obtaining a loss payable endorsement in form and substance
satisfactory to the Agent.




     (d) Notwithstanding the foregoing, any insurance or
condemnation proceeds received by the Loan Parties shall be
immediately forwarded to the Agent and the Agent may, at its
option, apply any such proceeds to the reduction of the Obligations
in accordance with Section 2.15(e), provided that in the case of
insurance proceeds pertaining to any Loan Party other than the
Borrowers, such insurance proceeds shall be applied to the Loans
owing by the Borrowers. The Agent may permit or require any Loan
Party to use such money, or any part thereof, to replace, repair,
restore or rebuild the Collateral in a diligent and expeditious
manner with materials and workmanship of substantially the same
quality as existed before the loss, damage or destruction.
Notwithstanding the foregoing, if the casualty giving rise to such
insurance proceeds could not reasonably be expected to have a
Material Adverse Effect and such insurance proceeds do not exceed
$1,000,000 in the aggregate, upon the applicable Loan Party’s
request, the Agent shall permit such Loan Party to replace,
restore, repair or rebuild the property; provided that, if such
Loan Party has not completed or entered into binding agreements to
complete such replacement, restoration, repair or rebuilding within
ninety days of such casualty, the Agent may apply such insurance
proceeds to the Obligations in accordance with Section 2.15. All
insurance proceeds that are to be made available to the Borrowers
to replace, repair, restore or rebuild the Collateral shall be
applied by the Agent to reduce the



75









 






outstanding principal balance of
the Revolving Loans (which application shall not result in a
permanent reduction of the Revolving Commitment) and upon such
application, the Agent shall establish a Reserve against the
Aggregate Borrowing Base in an amount equal to the amount of such
proceeds so applied. All insurance proceeds made available to any
Loan Party that is not a Borrower to replace, repair, restore or
rebuild Collateral shall be deposited in a cash collateral account.
In either case, thereafter, such funds shall be made available to
the applicable Loan Party to provide funds to replace, repair,
restore or rebuild the Collateral as follows:




     (i) the Borrower Representative, on behalf of the
applicable Borrower, shall request a Revolving Loan or the
Borrower Representative, on behalf of the applicable Loan
Party, shall request a release from the cash collateral
account be made in the amount needed;




     (ii) so long as the conditions set forth in Section 4.2
have been met, the Revolving Lenders shall make such
Revolving Loan or the Agent shall release funds from the cash
collateral account; and




     (iii) in the case of insurance proceeds applied against
the Revolving Loan, the Reserve established with respect to
such insurance proceeds shall be reduced by the amount of
such Revolving Loan.



     6.8 Compliance with Laws. Each Loan Party will comply with all laws,
rules, regulations, orders, writs, judgments, injunctions, decrees or awards to
which it may be subject including, without limitation, all Environmental Laws.



     6.9 Maintenance of Properties and Intellectual Property Rights. Each Loan
Party will do all things necessary to (i) maintain, preserve, protect and keep
its Property in good repair, working order and condition, and make all
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times and
(ii) obtain and maintain in effect at all times all material franchises,
governmental authorizations, Intellectual Property Rights, licenses and
permits, which are necessary for it to own its Property or conduct its business
as conducted on the Closing Date.



     6.10 Inspection. Each Loan Party will permit the Agent and the Lenders,
by their respective employees, representatives and agents, from time to time
upon two Business Days’ prior notice as frequently as the Agent reasonably
determines to be appropriate, to (a) inspect any of the Property, the
Collateral, and the books and financial records of such Loan Party, (b)
examine, audit and make extracts or copies of the books of accounts and other
financial records of such Loan Party, (c) have access to its properties,
facilities, the Collateral and its advisors, officers, directors and employees
to discuss the affairs, finances and accounts of such Loan Party and (d)
review, evaluate and make test verifications and counts of the Accounts,
Inventory and other Collateral of such Loan Party. In addition, each Loan
Party will provide to Agent and Lenders and their representatives and agents an
updated Customer List upon request. If a Default or an Unmatured Default has
occurred and is continuing, each Loan Party shall provide such access to the
Agent and to each Lender at all times and without advance notice.



76









 




Furthermore,
so long as any Default has occurred and is continuing, each Loan Party shall
provide the Agent and each Lender with access to its suppliers. Each Loan
Party shall promptly make available to the Agent and its counsel originals or
copies of all books and records that the Agent may reasonably request. The
Loan Parties acknowledge that from time to time the Agent may prepare and may
distribute to the Lenders certain audit reports pertaining to the Loan Parties’
assets for internal use by the Agent and the Lenders from information furnished
to it by or on behalf of the Loan Parties, after the Agent has exercised its
rights of inspection pursuant to this Agreement.




     6.11 Appraisals. Upon Agent’s request, the Loan Parties shall provide the
Agent with appraisals or updates thereof of (x) their Inventory and Equipment
if such request is pursuant to (a) above or (y) their Inventory if such request
is pursuant to (b) above, from an appraiser selected and engaged by the Agent,
and prepared on a basis, satisfactory to the Agent, such appraisals and updates
to include, without limitation, information required by applicable law and
regulations and by the internal policies of the Lenders. Any such appraisal
requested at a time when (a) a
Default or Unmatured Default exists, or (b) Aggregate Availability is less
than $10,000,000, shall be at the Loan Parties’ sole cost and expense.



     6.12 Communications with Accountants. Each Loan Party executing this
Agreement authorizes (a) the Agent and (b) so long as a Default has occurred
and is continuing, each Lender, to communicate directly with its independent
certified public accountants and authorizes those accountants and advisors to
communicate to the Agent and each Lender information relating to any Loan Party
with respect to the business, results of operations and financial condition of
any Loan Party.



     6.13 Collateral Access Agreements and Real Estate Purchases. Each Loan
Party shall use commercially reasonable efforts to obtain within sixty (60)
days after the Closing Date (or, if later, as of the date such location is
acquired or leased) a Collateral Access Agreement, from the lessor of each
leased property, mortgagee of owned property or bailee or consignee with
respect to any warehouse, processor or converter facility or other location
where Collateral is stored or located, which agreement or letter shall provide
access rights, contain a waiver or subordination of all Liens or claims that
the landlord, mortgagee or bailee or consignee may assert against the
Collateral at that location, and shall otherwise be reasonably satisfactory in
form and substance to the Agent. With respect to such locations or warehouse
space leased or owned as of the Closing Date and thereafter, if the Agent has
not received a Collateral Access Agreement as of the Effective Date (or, if
later, as of the date such location is acquired or leased), Borrower’s Eligible
Inventory at that location shall be subject to such Reserves as may be
established by the Agent.



     6.14 Deposit Account Control Agreements. The Loan Parties will provide to
the Agent within thirty (30) days after the Closing Date (or, if later, as of
the date any Loan Party’s interest in such account arises), a Deposit Account
Control Agreement duly executed on behalf of each financial institution holding
a deposit account of a Loan Party as set forth in the Security Agreement.



     6.15 Additional Collateral; Further Assurances.



77









 








     (a) Subject to applicable law, each Loan Party shall, unless
the Required Lenders otherwise consent, (i) cause each of its
Subsidiaries (excluding any Foreign Subsidiary) to become or remain
a Loan Party and a Guarantor and (ii) cause each (excluding any
Foreign Subsidiary) formed or acquired after the Closing Date in
accordance with the terms of this Agreement to (1) become a party
to this Agreement by executing the Joinder Agreement set forth as
Exhibit F hereto (the “Joinder Agreement”), and (2) guarantee
payment and performance of the Guaranteed Obligations pursuant to
the Guaranty.




     (b) Upon the request of the Agent, each Loan Party shall (i)
grant Liens to the Agent, for the benefit of the Agent and the
Lenders, pursuant to such documents as the Agent may reasonably
deem necessary and deliver such property, documents, and
instruments as the Agent may request to perfect the
Liens of the Agent in any Property of such Loan Party which
constitutes Collateral, including any parcel of real Property
located in the U.S. owned by any Loan Party, and (ii) in connection
with the foregoing requirements, or either of them, deliver to the
Agent all items of the type required by Section 4.1 (as
applicable). Upon execution and delivery of such Loan Documents
and other instruments, certificates, and agreements, each such
Person shall automatically become a Guarantor hereunder and
thereupon shall have all of the rights, benefits, duties, and
obligations in such capacity under the Loan Documents.




     (c) Each Loan Party will cause (i) 100% of the issued and
outstanding Capital Stock of each of its Domestic Subsidiaries and
(ii) 65% (or such greater percentage that, due to a change in an
applicable law after the date hereof, (1) could not reasonably be
expected to cause the undistributed earnings of such Foreign
Subsidiary as determined for U.S. federal income tax purposes to be
treated as a deemed dividend to such Foreign Subsidiary’s U.S.
parent and (2) could not reasonably be expected to cause any
material adverse tax consequences) of the issued and outstanding
Capital Stock entitled to vote (within the meaning of Treas. Reg.
Section 1.956-2(c)(2)) and 100% of the issued and outstanding
Capital Stock not entitled to vote (within the meaning of Treas.
Reg. Section 1.956-2(c)(2)) in each Foreign Subsidiary directly
owned by such Loan Party or any Domestic Subsidiary to be subject
at all times to a first priority, perfected Lien in favor of the
Agent pursuant to the terms and conditions of the Loan Documents or
other security documents as the Agent shall reasonably request.




     (d) Without limiting the foregoing, each Loan Party shall, and
shall cause each of the Borrowers’ Subsidiaries which is required
to become a Loan Party pursuant to the terms of this Agreement to,
execute and deliver, or cause to be executed and delivered, to the
Agent such documents and agreements, and shall take or cause to be
taken such actions as the Agent may, from time to time, reasonably
request to carry out the terms and conditions of this Agreement and
the other Loan Documents.




     (e) Notwithstanding the foregoing, at any time after a Default
has occurred, each Loan Party shall, upon the request of the Agent,
cause each



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Foreign Subsidiary to become a Loan Party and a
Guarantor and to grant Liens to the Agent on its assets and have
the balance of its stock pledged to the Agent.



     6.16 Dividends.




     (a) No Loan Party will or will permit any of their
Subsidiaries to declare or pay any dividends or make any
distributions on its Capital Stock (other than dividends or
distributions payable in its own common stock) or redeem,
repurchase or otherwise acquire or retire any of its Capital Stock
at any time outstanding, except (i) that any Subsidiary may declare
and pay dividends or make distributions to the Borrowers or to a
Wholly-Owned Subsidiary of the Borrowers or (ii) any Loan Party may
declare or pay dividends or make distributions on its Capital Stock
or redeem, repurchase or otherwise acquire or
retire any of its Capital Stock at any time outstanding and
any non-Wholly-Owned Subsidiary may declare or pay dividends or
make distributions on its Capital Stock to holders thereof other
than Loan Parties, in each case, so long as (x) no Default or
Unmatured Default exists or will be caused by the payment of such
dividend or distribution, (y) the Borrowers are in compliance with
Section 6.29.1 after giving effect to such dividend or distribution
and (z) the Availability is greater than ten percent (10%) of the
Aggregate Borrowing Base after giving effect to such dividend or
distribution.




     (b) No Loan Party shall directly or indirectly enter into or
become bound by any agreement, instrument, indenture or other
obligation (other than this Agreement and the other Loan Documents)
that could directly or indirectly restrict, prohibit or require the
consent of any Person with respect to the payment of dividends or
distributions or the making or repayment of intercompany loans by a
Subsidiary of the Borrowers to the Borrowers.



     6.17 Indebtedness. No Loan Party will create, incur or suffer to exist
any Indebtedness, except:




     (a) the Obligations;




     (b) Indebtedness existing on the date hereof and described in
Schedule 5.22;




     (c) purchase money Indebtedness incurred in connection with
the purchase of any Equipment; provided that, the amount of such
purchase money Indebtedness shall be limited to an amount not in
excess of the purchase price of such Equipment and the aggregate of
all such purchase money Indebtedness incurred in any Fiscal Year
shall not exceed $3,000,000;




     (d) Indebtedness which represents an extension, refinancing,
or renewal of any of the Indebtedness described in clauses (b) and
(c) and (g) hereof; provided that, (i) the principal amount or
interest rate of such Indebtedness is not increased, (ii) any Liens
securing such Indebtedness are not extended to any additional
Property of any Loan Party, (iii) no Loan Party that is not
originally



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obligated with respect to repayment of such Indebtedness
is required to become obligated with respect thereto, (iv) such
extension, refinancing or renewal does not result in a shortening
of the average weighted maturity of the Indebtedness so extended,
refinanced, renewed, (v) the terms of any such extension,
refinancing, or renewal are not less favorable to the obligor
thereunder than the original terms of such Indebtedness and (iv) if
the Indebtedness that is refinanced, renewed, or extended was
subordinated in right of payment to the Obligations, then the terms
and conditions of the refinancing, renewal, or extension
Indebtedness must include subordination terms and conditions that
are at least as favorable to the Agent and the Lenders as those
that were applicable to the refinanced, renewed, or extended
Indebtedness;




     (e) Indebtedness owing by any Loan Party to any other Loan
Party with respect to intercompany loans, provided further, that:




     (i) the applicable Loan Parties shall have executed and
delivered to the other Loan Party, on the Effective Date, a
demand note (collectively, the “Intercompany Notes”) to
evidence any such intercompany Indebtedness owing at any time
by any Loan Party to another Loan Party, which Intercompany
Notes shall be in form and substance reasonably satisfactory
to the Agent and shall be pledged and delivered to the Agent
pursuant to the Security Agreement as additional collateral
security for the Secured Obligations;




     (ii) the Loan Parties shall record all intercompany
transactions on their books and records in a manner
reasonably satisfactory to the Agent;




     (iii) the obligations of the Loan Parties under any such
Intercompany Notes shall be subordinated to the Obligations
of the Loan Parties hereunder in a manner reasonably
satisfactory to the Agent;




     (iv) at the time any such intercompany loan or advance
is made by a Loan Party and after giving effect thereto, such
Loan Party shall be Solvent;




     (v) no Default or Unmatured Default would occur and be
continuing after giving effect to any such proposed
intercompany loan;




     (f) Contingent Obligations (i) by endorsement of instruments
for deposit or collection in the ordinary course of business, (ii)
consisting of the Reimbursements Obligations and (iii) consisting
of the Guaranty and guarantees of Indebtedness incurred for the
benefit of any other Loan Party if the primary obligation is
expressly permitted elsewhere in this Section 6.17;




     (g) Capitalized Lease Obligations which in the aggregate do
not exceed $7,500,000 in any Fiscal Year;



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     (h) Indebtedness arising under Rate Management Transactions;




     (i) Indebtedness assumed in connection with any Permitted
Acquisition; provided that, the aggregate amount of Indebtedness
assumed under this clause (i) shall not exceed $7,500,000 and
provided further that, such Indebtedness is not incurred in
connection with, or in contemplation or anticipation of, such
Permitted Acquisition and does not attach to any asset of any
Borrower or any of its Subsidiaries;




     (j) other unsecured Indebtedness in an amount not in excess of
$5,000,000 in the aggregate outstanding at any time; and




     (k) Indebtedness evidenced by the Convertible Notes.



     6.18 Capital Structure. If all or any part of a Loan Party’s Capital
Stock has been pledged to the Agent, that Loan Party shall not issue additional
Capital Stock. No Loan Party shall engage in any business other than the
businesses currently engaged in by it.



     6.19 Merger. No Loan Party will merge or consolidate with or into any
other Person, except that (a) any Subsidiary of a Borrower may merge into such
Borrower or a Wholly-Owned Subsidiary of such Borrower and (b) any Loan Party
(other than the Borrowers) may merge with any other Loan Party.



     6.20 Sale of Assets. No Loan Party will lease, sell or otherwise dispose
of its Property (including any Capital Stock owned by it) to any other Person,
except:




     (a) sales of Inventory in the ordinary course of business;




     (b) the sale or other disposition of Equipment that is
obsolete or no longer useful in such Loan Party’s business; and




     (c) the sale or disposition of other assets having a book
value not exceeding $5,000,000 in the aggregate in any Fiscal Year.


The Net Cash Proceeds of any sale or disposition permitted pursuant to this
Section (other than pursuant to Section 6.20(a)) shall be delivered to the
Agent as required by Section 2.15 and applied to the Obligations as set forth
therein.




     6.21 Investments and Acquisitions. No Loan Party will (i) make or suffer
to exist any Investments (including without limitation, loans and advances to,
and other Investments in, Subsidiaries), or commitments therefor, (ii) create
any Subsidiary (other than a Subsidiary that is a Borrower or Guarantor
hereunder), (iii) become or remain a partner in any partnership or joint
venture, or (iv) make any Acquisition, except:




     (a) Cash Equivalent Investments, subject to control agreements
in favor of the Agent for the benefit of the Lenders or otherwise
subject to a perfected security interest in favor of the Agent for
the benefit of the Lenders;



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     (b) Investments in Subsidiaries existing as of the Closing
Date;




     (c) other Investments in existence on the Closing Date and
described in Schedule 6.21;




     (d) Investments consisting of loans or advances made to
employees of such Loan Party on an arms-length basis in the
ordinary course of business consistent with past practices for
travel and entertainment expenses, relocation costs and similar
purposes up to a maximum of $500,000 to any employee and up to a
maximum of $2,000,000 in the aggregate at any one time outstanding;




     (e) subject to Sections 4.2(a) and 4.4 of the Security
Agreement, Investments comprised of notes payable, or stock or
other securities issued by Account Debtors to such Loan Party
pursuant to negotiated agreements with respect to settlement of
such Account Debtor’s Accounts in the ordinary course of business,
consistent with past practices;




     (f) additional Investments in Wholly-Owned Subsidiaries which
are Loan Parties;




     (g) Permitted Acquisitions and the formation of Wholly-Owned
Subsidiaries of the Borrowers in connection with a Permitted
Acquisition;




     (h) Investments in Subsidiaries that are not Loan Parties not
to exceed $500,000 in the aggregate during the term of this
Agreement; and




     (i) other Investments not to exceed $5,000,000 in the
aggregate during the term of this Agreement.



     6.22 Liens.




     (a) No Loan Party will create, incur, or suffer to exist any
Lien in, of, or on the Property of such Loan Party, except the
following (collectively, “Permitted Liens”):




     (i) Liens for taxes, fees, assessments, or other
governmental charges or levies on the Property of such Loan
Party if such Liens (1) shall not at the time be delinquent
or (2) subject to the provisions of Section 6.6, do not
secure obligations in excess of $1,000,000, are being
contested in good faith and by appropriate proceedings
diligently pursued, adequate reserves in accordance with GAAP
have been set aside on the books of such Loan Party, and a
stay of enforcement of such Lien is in effect;




     (ii) Liens imposed by law, such as carrier’s,
warehousemen’s, and mechanic’s Liens and other similar Liens
arising in the ordinary course of business which secure
payment of obligations not more than ten days past due;



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     (iii) statutory Liens in favor of landlords of real
Property leased by such Loan Party; provided that, such Loan
Party is current with respect to payment of all rent and
other amounts due to such landlord under any lease of such
real Property;




     (iv) Liens arising out of pledges or deposits under
worker’s compensation laws, unemployment insurance, old age
pensions, or other social security or retirement benefits, or
similar legislation or to secure the performance of bids,
tenders, or contracts (other than for the repayment of
Indebtedness) or to secure indemnity, performance, or other
similar bonds for the performance of bids, tenders, or
contracts (other than for the repayment of Indebtedness) or
to secure statutory obligations (other than liens arising
under ERISA or Environmental Laws) or surety or appeal bonds,
or to secure indemnity, performance, or other similar bonds;




     (v) utility easements, building restrictions, and such
other encumbrances or charges against real Property as are of
a nature generally existing with respect to properties of a
similar character and which do not in any material way affect
the marketability of such real Property or interfere with the
use thereof in the business of such Loan Party;




     (vi) Liens existing on the Closing Date and described in
Schedule 6.22;




     (vii) Liens resulting from any extension, refinancing,
or renewal of the related Indebtedness as permitted pursuant
to Section 6.17(d); provided that, the Liens evidenced
thereby are not increased to cover any additional Property
not originally covered thereby;




     (viii) Liens securing purchase money Indebtedness of
such Loan Party permitted pursuant to Section 6.17(c);
provided that, such Liens attach only to the Property which
was purchased with the proceeds of such purchase money
Indebtedness;




     (ix) Liens on property or assets (other than Accounts
and Inventory) acquired pursuant to a Permitted Acquisition,
or on property or assets (other than Accounts and Inventory)
of a Loan Party in existence at the time such Loan Party is
acquired pursuant to a Permitted Acquisition, provided that
(1) any Indebtedness that is secured by such Liens is
permitted under Section 6.17, and (2) such Liens are not
incurred in connection with, or in contemplation or
anticipation of, such Permitted Acquisition and do not attach
to any asset of any other Loan Party; and




     (x) Liens in favor of the Agent granted pursuant to any
Loan Document.




     (b) Notwithstanding the foregoing, none of the Liens permitted
pursuant to this Section 6.22, other than (1) clauses (i) and (x)
above, may at any



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time attach to any Accounts of any Loan Party and
(2) clauses (i) through (iii) and (x) above, may at any time attach
to any Inventory of any Loan Party.




     (c) Other than as provided in the Loan Documents or in
connection with the creation or incurrence of any Indebtedness
under Section 6.17(c), no
Loan Party will enter into or become subject to any negative
pledge or other restriction on the right of such Loan Party to
grant Liens to the Agent and the Lenders on any of its Property;
provided that, any such negative pledge or other restriction
entered into in connection with the creation of Indebtedness under
Section 6.17(c) shall be limited to the Property securing such
purchase money Indebtedness.



     6.23 Change of Name or Location; Change of Fiscal Year. No Loan Party
shall (a) change its name as it appears in official filings in the state of its
incorporation or organization, (b) change its chief executive office, principal
place of business, mailing address, corporate offices or warehouses or
locations at which Collateral is held or stored, or the location of its records
concerning the Collateral as set forth in the Security Agreement, (c) change
the type of entity that it is, (d) change its organization identification
number, if any, issued by its state of incorporation or other organization, or
(e) change its state of incorporation or organization, in each case, unless (1)
the Agent shall have received at least thirty days prior written notice of such
change and (2) the Agent shall have acknowledged in writing that, either (i)
such change will not adversely affect the validity, perfection or priority of
the Agent’s security interest in the Collateral, or (ii) any reasonable action
requested by the Agent in connection therewith has been completed or taken
(including any action to continue the perfection of any Liens in favor of the
Agent, on behalf of Lenders, in any Collateral), provided that, any new
location shall be in the continental U.S. No Loan Party shall change its Fiscal
Year.



     6.24 Affiliate Transactions. No Loan Party will enter into any
transaction (including, without limitation, the purchase or sale of any
Property or service) with, or make any payment or transfer (including, without
limitation, any payment or transfer with respect to any fees or expenses for
management services) to, any Affiliate except in the ordinary course of
business and pursuant to the reasonable requirements of such Loan Party’s
business and upon fair and reasonable terms no less favorable to such Loan
Party than such Loan Party would obtain in a comparable arms-length
transaction.



     6.25 Amendments to Agreements. No Loan Party will, nor will any Loan
Party permit its Subsidiary to, amend or terminate its articles of
incorporation, charter, certificate of formation, by-laws, operating,
management or partnership agreement or other organizational document.



     6.26 Prepayment of Indebtedness; Subordinated Indebtedness.




     (a) No Loan Party shall, directly or indirectly, voluntarily
purchase, redeem, defease or prepay any principal of, premium, if
any, interest or other amount payable in respect of any
Indebtedness prior to its scheduled maturity, other than (i) the
Obligations; (ii) Indebtedness secured by a Permitted Lien if the
asset securing such Indebtedness has been sold or otherwise
disposed of in



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accordance with Section 6.20; (iii) Indebtedness
permitted by Section 6.17(d)
upon any refinancing thereof in accordance therewith; (iv)
Indebtedness permitted by Section 6.17(e); and (v) Indebtedness
permitted by Section 6.17(k).




     (b) No Loan Party shall make any amendment or modification to
the indenture, note or other agreement evidencing or governing any
Subordinated Indebtedness, or directly or indirectly voluntarily
prepay, defease or in substance defease, purchase, redeem, retire
or otherwise acquire, any Subordinated Indebtedness other than with
respect to the Convertible Note Repurchase.



     6.27 Financial Contracts. No Loan Party shall enter into or remain liable
upon any Financial Contract, except for Rate Management Transactions permitted
by Section 6.17.



     6.28 Capital Expenditures. No Loan Party shall expend, or be committed to
expend, in excess of $35,000,000 for Capital Expenditures during any Fiscal
Year in the aggregate for the Company and its Subsidiaries.



     6.29 Financial Covenants.




     6.29.1 Fixed Charge Coverage Ratio.(a) At all times while the
Term B Loan is outstanding, the Borrowers will not permit the Fixed
Charge Coverage Ratio, determined as of the end of each of the
Company’s Fiscal Quarter for the then most-recently ended four
Fiscal Quarters, to be less than 1.15 to 1.0; provided that (i) for
the Fiscal Quarter ending June 30, 2004, the Fixed Charge Coverage
Ratio shall be calculated using the most-recently ended Fiscal
Quarter, (ii) for the Fiscal Quarter ending September 30, 2004, the
Fixed Charge Coverage Ratio shall be calculated using the
most-recently ended two Fiscal Quarters and (iii) for the Fiscal
Quarter ending December 31, 2004, the Fixed Charge Coverage Ratio
shall be calculated using the most-recently ended three Fiscal
Quarters.




     (b) At all times after the Term B Loan has been paid in full,
the Borrowers will not permit the Fixed Charge Coverage Ratio,
determined as of the end of each of the Company’s Fiscal Quarter
for the then most-recently ended four Fiscal Quarters, to be less
than 1.0 to 1.0; provided that (i) for the Fiscal Quarter ending
June 30, 2004, the Fixed Charge Coverage Ratio shall be calculated
using the most-recently ended Fiscal Quarter, (ii) for the Fiscal
Quarter ending September 30, 2004, the Fixed Charge Coverage Ratio
shall be calculated using the most-recently ended two Fiscal
Quarters and (iii) for the Fiscal Quarter ending December 31, 2004,
the Fixed Charge Coverage Ratio shall be calculated using the
most-recently ended three Fiscal Quarters.



                 6.29.2 Minimum Tangible Net Worth. The Company will at all times maintain
Consolidated Tangible Net Worth
of not less than the sum of (a) $105,153,600 plus (b) 50% of positive
Consolidated Net Income earned in each Fiscal Quarter beginning with the Fiscal
Quarter ending September 30, 2004.



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     6.30 Depository Banks. Each Loan Party shall maintain the Agent as such
Loan Party’s principal depository bank, including for the maintenance of
operating, administrative, cash management, collection activity, and other
deposit accounts for the conduct of its business.



     6.31 Sale of Accounts. No Loan Party will, nor will any Loan Party permit
its Subsidiary to, sell or otherwise dispose of any notes receivable or
accounts receivable, with or without recourse; provided, however that a Loan
Party and its Subsidiary may assign delinquent notes and accounts receivable
for collection purposes.



     6.32 Convertible Note Repurchase.



     On or before the 60th day after the Closing Date, the Company shall have
completed the Convertible Note Repurchase in a manner reasonably satisfactory
to Agent and Lenders.



     6.33 Additional Legal Opinions.



     On or before the 10th day after the Closing Date, the Agent shall have
received a duly executed copy of the legal opinion of Greenberg Traurig LLP
opining as to Texas law with respect to enforceability, lien creation, lien
perfection and choice of law in connection with the transactions contemplated
by this Agreement and the other Loan Documents, in form and substance
reasonably satisfactory to the Agent.



ARTICLE VII




DEFAULTS



The occurrence of any one or more of the following events shall constitute a
“Default” hereunder:





     (a) any representation or warranty made or deemed made by or
on behalf of any Loan Party to any Lender or the Agent under or in
connection with this Agreement, any other Loan Document, any Credit
Extension, or any certificate or information delivered in
connection with any of the foregoing shall be materially false on
the date as of which made;




     (b) (i) nonpayment, when due (whether upon demand or
otherwise), of any principal, or (ii) nonpayment, within three (3)
days after the due date (whether upon demand or otherwise), of any
interest, fee, Reimbursement Obligation or any other obligation
owing under any of the Loan Document;




     (c) the breach by any Loan Party of any of the terms or
provisions of Section 6.2, 6.3(a), 6.16 through 6.23 or 6.25
through 6.31 which is not remedied within three (3) days after the
earlier of such breach or written notice from the Agent or any
Lender;




     (d) the breach by any Loan Party (other than a breach which
constitutes a Default under another Section of this Article VII) of
any of the terms



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or provisions of (i) Section 6.1, 6.3 (other than
Section 6.3(a)), 6.4 through 6.15 or 6.24 of this Agreement which
is not remedied within fifteen (15) days after the earlier of such
breach or written notice from the Agent or any Lender or (ii) any
other Section of this Agreement which is not remedied within
fifteen (15) days after the earlier of such breach or written
notice from the Agent or any Lender;




     (e) failure of any Loan Party to pay when due any Material
Indebtedness or a default, breach or other event occurs under any
term, provision or condition contained in any Material Indebtedness
Agreement of any Loan Party, the effect of which default, event or
condition is to cause, or to permit the holder(s) of such Material
Indebtedness or the lender(s) under any Material Indebtedness
Agreement to cause, such Material Indebtedness to become due prior
to its stated maturity or any commitment to lend under any Material
Indebtedness Agreement to be terminated prior to its stated
expiration date; any Material Indebtedness of any Loan Party shall
be declared to be due and payable or required to be prepaid or
repurchased (other than by a regularly scheduled payment) prior to
the stated maturity thereof; or any Loan Party shall not pay, or
admit in writing its inability to pay, its debts generally as they
become due;




     (f) any Loan Party shall (i) have an order for relief entered
with respect to it under the Bankruptcy Code as now or hereafter in
effect, (ii) make an assignment for the benefit of creditors, (iii)
apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar
official for it or any portion of its Property which constitutes a
Substantial Portion, (iv) institute any proceeding seeking an order
for relief under the Bankruptcy Code as now or hereafter in effect
or seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement,
adjustment or composition of it or its debts under any law relating
to bankruptcy, insolvency or reorganization or relief of debtors or
fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it, (v) take any
corporate or partnership action to authorize or effect any of the
foregoing actions set forth in this subsection (f) or (vi) fail to
contest in good faith any appointment or proceeding described in
subsection (g) below;




     (g) a receiver, trustee, examiner, liquidator or similar
official shall be appointed for any Loan Party or any portion of
its Property which constitutes a Substantial Portion, or a
proceeding described in subsection (f)(iv) of Article VII shall be
instituted against any Loan Party and such appointment continues
undischarged or such proceeding continues undismissed or
unstayed for a period of sixty consecutive days;




     (h) any court, government or governmental agency shall
condemn, seize or otherwise appropriate, or take custody or control
of, all or any portion of the Property of any Loan Party which,
when taken together with all other Property of any Loan Party so
condemned, seized, appropriated, or taken custody or



87









 






control of,
during the twelve-month period ending with the month in which any
such action occurs, constitutes a Substantial Portion;




     (i) any loss, theft, damage or destruction of any item or
items of Collateral or other property of any Loan Party occurs
which could reasonably be expected to cause a Material Adverse
Effect and is not adequately covered by insurance;




     (j) any Loan Party shall fail within thirty days to pay, bond
or otherwise discharge one or more (i) judgments or orders for the
payment of money in excess of $1,000,000 (or the equivalent thereof
in currencies other than U.S. Dollars) in the aggregate, or (ii)
nonmonetary judgments or orders which, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect, which judgments or orders, in any such case, are not stayed
on appeal or otherwise being appropriately contested in good faith
by proper proceedings diligently pursued;




     (k) any Change in Control shall occur;




     (l) the Unfunded Liabilities of all Single Employer Plans
shall exceed in the aggregate $1,000,000 or any Reportable Event
shall occur in connection with any Plan;




     (m) any Borrower or any other member of the Controlled Group
shall have been notified by the sponsor of a Multiemployer Plan
that it has incurred withdrawal liability to such Multiemployer
Plan in an amount which, when aggregated with all other amounts
required to be paid to Multiemployer Plans by such Borrower or any
other member of the Controlled Group as withdrawal liability
(determined as of the date of such notification), exceeds
$1,000,000 or requires payments exceeding $1,000,000 per annum;




     (n) a Borrower or any other member of the Controlled Group
shall have been notified by the sponsor of a Multiemployer Plan
that such Multiemployer Plan is in reorganization or is being
terminated, within the meaning of Title IV of ERISA, if as a result
of such reorganization or termination the aggregate annual
contributions of such Borrower and the other members of the
Controlled Group (taken as a whole) to all Multiemployer Plans
which are then in reorganization or being terminated have been or
will be increased over the amounts contributed to such
Multiemployer Plans for the respective plan years of
each such Multiemployer Plan immediately preceding the plan
year in which the reorganization or termination occurs by an amount
exceeding $1,000,000;




     (o) any Loan Party shall (i) be the subject of any proceeding
or investigation pertaining to the release by the any Loan Party or
any other Person of any toxic or hazardous waste or substance into
the environment, or (ii) violate any Environmental Law, which, in
the case of an event described in clause (i) or clause (ii), could
reasonably be expected to have a Material Adverse Effect;



88









 






     (p) the occurrence of any “default,” as defined in any Loan
Document (other than this Agreement) or the breach of any of the
terms or provisions of any Loan Document (other than this
Agreement), which default or breach continues beyond any period of
grace therein provided;




     (q) the Guaranty shall fail to remain in full force or effect
or any action shall be taken to discontinue or to assert the
invalidity or unenforceability of the Guaranty, or any Guarantor
shall fail to comply with any of the terms or provisions of the
Guaranty to which it is a party, or any Guarantor shall deny that
it has any further liability under the Guaranty to which it is a
party, or shall give notice to such effect;




     (r) any Collateral Document shall for any reason fail to
create a valid and perfected first priority security interest in
any Collateral purported to be covered thereby, except as permitted
by the terms of any Collateral Document, or any Collateral Document
shall fail to remain in full force or effect or any action shall be
taken to discontinue or to assert the invalidity or
unenforceability of any Collateral Document, or any Loan Party
shall fail to comply with any of the terms or provisions of any
Collateral Document;




     (s) any material provision of any Loan Document for any reason
ceases to be valid, binding and enforceable in accordance with its
terms (or any Loan Party shall challenge the enforceability of any
Loan Document or shall assert in writing, or engage in any action
or inaction based on any such assertion, that any provision of any
of the Loan Documents has ceased to be or otherwise is not valid,
binding and enforceable in accordance with its terms);




     (t) the representations and warranties set forth in Section
5.17 (Plan Assets; Prohibited Transactions) shall at any time not
be true and correct;




     (u) any Borrower or any of their Subsidiaries shall fail to
pay when due any Operating Lease Obligation in excess of
$1,000,000;




     (v) nonpayment by any Borrower or any of its Subsidiaries of
any Rate Management Obligation when due or the breach by any
Borrower or any of its Subsidiaries of any term, provision or
condition contained in any Rate Management Transaction or any
transaction of the type described in the definition of “Rate
Management Transactions,” whether or not any Lender or Affiliate of
a Lender is a party thereto;




     (w) any default, termination or non-renewal of licenses of the
Borrowers which in the aggregate accounted for thirty percent (30%)
or more of the revenues of the Borrowers, on a consolidated basis,
in the previous Fiscal Year; or




     (x) any Loan Party is criminally indicted or convicted under
any law that may reasonably be expected to lead to a forfeiture of
any Property of such Loan Party having a fair market value in
excess of $1,000,000.



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ARTICLE VIII




REMEDIES; WAIVERS AND AMENDMENTS




     8.1 Remedies.




     (a) If any Default occurs and is continuing, the Agent may in
its discretion (and at the written request of the Required Lenders,
shall) (i) reduce the Aggregate Commitment or the Revolving
Commitment, (ii) terminate or suspend the obligations of the
Lenders to make Loans hereunder and the obligation and power of the
LC Issuer to issue Facility LCs, (iii) declare all or any portion
of the Obligations to be due and payable, whereupon such
Obligations shall become immediately due and payable, without
presentment, demand, protest or notice of any kind, all of which
the Borrower hereby expressly waives, (iv) upon notice to the
Borrower Representative and in addition to the continuing right to
demand payment of all amounts payable under this Agreement, the
Agent may either (1) make demand on the Borrowers to pay, and the
Borrowers will, forthwith upon such demand and without any further
notice or act, pay to the Agent an amount, in immediately available
funds (which funds shall be held in the Facility LC Collateral
Account), equal to 105% of the Collateral Shortfall Amount or (2)
deliver a Supporting Letter of Credit as required by Section
2.1.2(l), whichever the Agent may specify in its sole discretion,
(v) increase the rate of interest applicable to the Loans and the
LC Fees as set forth in this Agreement and (vi) exercise any rights
and remedies provided to the Agent under the Loan Documents or at
law or equity, including all remedies provided under the UCC.




     (b) If any Default described in subsections (f) or (g) of
Article VII occurs with respect to any Loan Party, the obligations
of the Lenders to make Loans hereunder and the obligation and power
of the LC Issuer to issue Facility LCs shall automatically
terminate and all Obligations shall immediately become due and
payable without any election or action on the part of the Agent,
the LC Issuer or any Lender and the Loan Parties will be and become
thereby unconditionally obligated, without any further notice, act
or demand, to pay to the Agent an amount equal to 105% of the
Collateral Shortfall Amount, which funds shall be deposited in the
Facility LC Collateral Account.




     (c) If, within thirty days after acceleration of the maturity
of the Obligations or termination of the obligations of the Lenders
to make Loans and the obligation and power of the LC Issuer to
issue Facility LCs hereunder as a result of any Default (other than
any Default as described in subsections (f) or (g) of Article VII
with respect to any Borrower) and before any judgment or decree for
the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so
direct, the Agent shall, by notice to the Borrower Representative,
rescind and annul such acceleration and/or termination.



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     (d) If at any time while any Default is continuing, the Agent
determines that the Collateral Shortfall Amount at such time is
greater than zero, the Agent may make demand on the Borrowers (upon
notice to the Borrower Representative) to pay, and the Borrowers
will, forthwith upon such demand and without any further notice or
act, pay to the Agent an amount equal to 105% of the Collateral
Shortfall Amount, which funds shall be deposited in the Facility LC
Collateral Account. The Borrowers hereby pledge, assign, and grant
to the Agent, on behalf of and for the benefit of the Agent, the
Lenders, and the LC Issuer, a security interest in all of the
Borrowers’ right, title, and interest in and to all funds which may
from time to time be on deposit in the Facility LC Collateral
Account to secure the prompt and complete payment and performance
of the Obligations.




     (e) The Agent may at any time or from time to time after funds
are deposited in the Facility LC Collateral Account, apply such
funds to the payment of the Obligations and any other amounts as
shall from time to time have become due and payable by the
Borrowers to the Lenders or the LC Issuer under the Loan Documents.




     (f) At any time while any Default is continuing, neither the
Borrowers nor any Person claiming on behalf of or through the
Borrowers shall have any right to withdraw any of the funds held in
the Facility LC Collateral Account. After all of the Secured
Obligations have been indefeasibly paid in full and the Aggregate
Commitment has been terminated, any funds remaining in the Facility
LC Collateral Account shall be returned by the Agent to the
Borrowers or paid to whomever may be legally entitled thereto at
such time.



     8.2 Waivers by Loan Parties. Except as otherwise provided for in this
Agreement or by applicable law, each Loan Party waives: (a) presentment, demand
and protest and notice of presentment, dishonor, notice of intent to
accelerate, notice of acceleration, protest, default, nonpayment, maturity,
release, compromise, settlement, extension or renewal of any or all commercial
paper, accounts, contract rights, documents, instruments, chattel paper and
guaranties at any time held by the Agent on which any Loan Party may in any way
be liable, and hereby ratifies and confirms whatever the Agent may do in this
regard, (b) all rights to notice and a hearing prior to the Agent’s taking
possession or control of, or to the Agent’s replevy, attachment or levy upon,
the Collateral or any
bond or security that might be required by any court prior to allowing the
Agent to exercise any of its remedies, and (c) the benefit of all valuation,
appraisal, marshaling and exemption laws.



     8.3 Amendments.




     (a) Subject to the provisions of this Section 8.3, no
amendment, waiver or modification of any provision of this
Agreement or any other Loan Document, and no consent with respect
to any departure by any Loan Party therefrom, shall be effective
unless the same shall be in writing and signed by the Required
Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Loan Parties and then any such waiver or consent
shall be



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effective only in the specific instance and for the
specific purpose for which given.




     (b) Notwithstanding subsection (a) above, no such amendment,
waiver or other modification with respect to this Agreement shall,
without the consent of all of the Lenders:




     (i) extend the final maturity of any (A) Revolving Loan
to a date after the Revolver Termination Date, (B) Term A
Loan to a date after the Facility Termination Date, (C) Term
B Loan to a date after the Term B Termination Date and/or (D)
Loan to a date after the Facility Termination Date;




     (ii) postpone any regularly scheduled payment of
principal of any Loan or reduce or forgive all or any portion
of the principal amount of any Loan or any Reimbursement
Obligation or reduce the amount or extend the payment date
for, the mandatory payments required under Article II;




     (iii) reduce the rate or extend the time of payment of
interest or fees payable to the Lenders pursuant to any Loan
Document;




     (iv) reduce the percentage or number of Lenders
specified in the definition of Required Lenders;




     (v) extend the Facility Termination Date;




     (vi) increase the amount of the Aggregate Commitment or
the Commitment of any Lender hereunder (other than in
connection with a Revolving Credit Adjustment Event or
pursuant to Section 12.3);




     (vii) increase the advance rates set forth in the
definition of Borrowing Base;




     (viii) permit any Loan Party to assign its rights under
this Agreement;




     (ix) amend this Section 8.3;




     (x) release any guarantor of any Credit Extension,
except as otherwise permitted herein or in the other Loan
Documents; or




     (xi) except as provided in Section 10.16 or any
Collateral Document, release all or substantially all of the
Collateral.




     (c) No amendment of any provision of this Agreement relating
to the Agent or to the Non-Ratable Loans, the Overadvances or the
Protective Advances shall be effective without the written consent
of the Agent. No amendment of any



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provision relating to the LC
Issuer shall be effective without the written consent of the LC
Issuer. The Agent may (i) amend the Commitment Schedule to reflect
assignments entered into pursuant to Section 12.3, and (ii) waive
payment of the fee required under Section 12.3(c) and (iii) after
consultation with the Borrower Representative, implement the rights
set forth in paragraph 4 of the Fee Letter without obtaining the
consent of any other party to this Agreement.




     (d) If, in connection with any proposed amendment, waiver or
consent (a “Proposed Change”) requiring the consent of all Lenders,
the consent of the Required Lenders is obtained, but the consent of
other Lenders is not obtained (any such Lender whose consent is not
obtained being referred to herein as a “Non-Consenting Lender”),
then, so long as the Agent is not a Non-Consenting Lender, the
Borrowers may elect to replace such Non-Consenting Lender as a
Lender party to this Agreement, provided that, concurrently with
such replacement, (i) another bank or other entity which is
reasonably satisfactory to the Borrowers and the Agent shall agree,
as of such date, to purchase for cash the Advances and other
Obligations due to the Non-Consenting Lender pursuant to an
Assignment Agreement and to become a Lender for all purposes under
this Agreement and to assume all obligations of the Non-Consenting
Lender to be terminated as of such date and to comply with the
requirements of Section 12.3 applicable to assignments, and (ii)
the Borrowers shall pay to such Non-Consenting Lender in same day
funds on the day of such replacement (1) all interest, fees and
other amounts then accrued but unpaid to such Non-Consenting Lender
by the Borrowers hereunder to and including the date of
termination, including without limitation payments due to such
Non-Consenting Lender under Sections 3.1, 3.2 and 3.5, and (2) an
amount, if any, equal to the payment which would have been due to
such Lender on the day of such replacement under Section 3.4 had
the Loans of such Non-Consenting Lender been prepaid on such date
rather than sold to the replacement Lender.



     8.4 Preservation of Rights. No delay or omission of the Lenders, the LC
Issuer or the Agent to exercise any right under the Loan Documents shall impair
such right or be construed to be a waiver of any Default or an acquiescence
therein, and the making of a Credit Extension notwithstanding the existence of
a Default or the inability of the Borrowers to satisfy the conditions precedent
to such Credit
Extension shall not constitute any waiver or acquiescence. Any single or
partial exercise of any such right shall not preclude other or further exercise
thereof or the exercise of any other right, and no waiver, amendment or other
variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Lenders required
pursuant to Section 8.3, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Agent, the LC
Issuer and the Lenders until the Obligations have been paid in full.



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ARTICLE IX




GENERAL PROVISIONS




     9.1 Survival of Representations. All representations and warranties of
the Loan Parties contained in this Agreement and the other Loan Documents shall
survive the execution and delivery of the Loan Documents and the making of the
Credit Extensions herein contemplated.



     9.2 Governmental Regulation. Anything contained in this Agreement to the
contrary notwithstanding, neither the LC Issuer nor any Lender shall be
obligated to extend credit to the Borrowers in violation of any limitation or
prohibition provided by any applicable statute or regulation.



     9.3 Headings. Section headings in the Loan Documents are for convenience
of reference only, and shall not govern the interpretation of any of the
provisions of the Loan Documents.



     9.4 Entire Agreement. The Loan Documents embody the entire agreement and
understanding among the Loan Parties, the Agent, the LC Issuer and the Lenders
and supersede all prior agreements and understandings among the Loan Parties,
the Agent and the Lenders relating to the subject matter thereof other than
those contained in the Fee Letter which shall survive and remain in full force
and effect during the term of this Agreement. THIS WRITTEN AGREEMENT
REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED
BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.



     9.5 Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other lender (except to the extent to
which the Agent is authorized to act as administrative agent for the Lenders
hereunder). The failure of any Lender to perform any of its obligations
hereunder shall not relieve any other Lender from any of
its obligations hereunder. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns, provided, however, that
the parties hereto expressly agree that the Arranger shall enjoy the benefits
of the provisions of Sections 9.6, 9.10 and 10.11 to the extent specifically
set forth therein and shall have the right to enforce such provisions on its
own behalf and in its own name to the same extent as if it were a party to this
Agreement.



     9.6 Expenses; Indemnification.




     (a) Expenses. The Borrowers shall reimburse the Agent and the
Arranger for any costs, internal charges and out-of-pocket expenses
(including reasonable attorneys’ fees and time charges of attorneys
for the Agent) paid or incurred by the Agent or the Arranger in
connection with the preparation,



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negotiation, execution, delivery,
syndication, distribution (including, without limitation, via the
internet or through a service such as Intralinks), review,
amendment, modification, and administration of the Loan Documents.
The Borrowers also agree to reimburse the Agent, the Arranger, the
LC Issuer and the Lenders for any costs, internal charges and
out of pocket expenses (including attorneys’ fees and time charges
of attorneys for the Agent, the Arranger, the LC Issuer and the
Lenders, which attorneys may be employees of the Agent, the
Arranger, the LC Issuer or the Lenders) paid or incurred by the
Agent, the Arranger, the LC Issuer or any Lender in connection with
the collection and enforcement of the Loan Documents. Expenses
being reimbursed by the Borrowers under this Section include,
without limitation, costs and expenses incurred in connection with:




     (i) appraisals of all or any portion of the Collateral,
including each parcel of real Property or interest in real
Property described in any Collateral Document, which
appraisals shall be in conformity with the applicable
requirements of any law or any governmental rule, regulation,
policy, guideline or directive (whether or not having the
force of law), or any interpretation thereof, including,
without limitation, the provisions of Title XI of the
Financial Institutions Reform, Recovery and Enforcement Act
of 1989, as amended, reformed or otherwise modified from time
to time, and any rules promulgated to implement such
provisions (including travel, lodging, meals and other out of
pocket expenses);




     (ii) field examinations and audits and the preparation
of Reports at the Agent’s then customary charge (such charge
is currently $850 per day (or portion thereof) for each
Person retained or employed by the Agent with respect to each
field examination or audit) plus travel, lodging, meals and
other out of pocket expenses, provided, that Loan Parties’
reimbursement obligations with respect to field examinations
shall apply to no more than three field examinations in any
calendar year, unless a Default or Unmatured Default shall
have occurred in the twelve (12) month period preceding such
field examination;




     (iii) any amendment, modification, supplement, consent,
waiver or other documents prepared with respect to any Loan
Document and the transactions contemplated thereby;




     (iv) lien and title searches and title insurance;




     (v) taxes, fees and other charges for recording the
Mortgages, filing financing statements and continuations, and
other actions to perfect, protect, and continue the Agent’s
Liens (including costs and expenses paid or incurred by the
Agent in connection with the consummation of the Agreement);



95









 






     (vi) sums paid or incurred to take any action required
of any Loan Party under the Loan Documents that such Loan
Party fails to pay or take;




     (vii) any litigation, contest, dispute, proceeding or
action (whether instituted by Agent, the LC Issuer, any
Lender, any Loan Party or any other Person and whether as to
party, witness or otherwise) in any way relating to the
Collateral, the Loan Documents or the transactions
contemplated thereby; and




     (viii) costs and expenses of forwarding loan proceeds,
collecting checks and other items of payment, and
establishing and maintaining the Funding Account and lock
boxes, and costs and expenses of preserving and protecting
the Collateral.



     The foregoing shall not be construed to limit any other provisions of the
Loan Documents regarding costs and expenses to be paid by the Borrowers. All
of the foregoing costs and expenses may be charged to the Borrower’s Loan
Account as Revolving Loans or to another deposit account, all as described in
Section 2.17(b).




     (b) Indemnification. The Borrowers hereby further agree,
jointly and severally, to indemnify the Agent, the Arranger, the LC
Issuer each Lender, their respective Affiliates, and each of their
directors, officers and employees against all losses, claims,
damages, penalties, judgments, liabilities and expenses (including,
without limitation, all expenses of litigation or preparation
therefor whether or not the Agent, the Arranger, the LC Issuer any
Lender or any Affiliate is a party thereto) which any of them may
pay or incur arising out of or relating to this Agreement, the
other Loan Documents, the transactions contemplated hereby or the
direct or indirect application or proposed application of the
proceeds of any Credit Extension hereunder except to the extent
that they are determined in a final non-appealable judgment by a
court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of the party seeking
indemnification. The obligations of the Borrowers under this
Section 9.6 shall survive the termination of this Agreement.
WITHOUT LIMITATION OF THE FOREGOING, IT IS THE INTENTION OF THE
BORROWERS AND
THE BORROWERS AGREE THAT THE FOREGOING INDEMNITIES SHALL APPLY
TO EACH INDEMNIFIED PARTY WITH RESPECT TO LOSSES, CLAIMS, DAMAGES,
PENALTIES, JUDGMENTS, LIABILITIES AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ALL EXPENSES OF LITIGATION OR PREPARATION THEREFOR),
WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE
NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PARTY.



     9.7 Numbers of Documents. All statements, notices, closing documents, and
requests hereunder shall be furnished to the Agent with sufficient counterparts
so that the Agent may furnish one to each of the Lenders.



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     9.8 Accounting. Except as provided to the contrary herein, all accounting
terms used herein shall be interpreted and all accounting determinations
hereunder shall be made in accordance with GAAP in a manner consistent with
that used in preparing the financial statements referred to in Section 5.5,
except that any calculation or determination which is to be made on a
consolidated basis shall be made for the Company and all of its Subsidiaries,
including those Subsidiaries, if any, which are unconsolidated on the Company’s
audited financial statements. If at any time any change in GAAP would affect
the computation of any financial ratio or requirement set forth in any Loan
Document, and the Borrowers (through the Borrower Representative), the Agent or
the Required Lenders shall so request the Agent, the Lenders and the Loan
Parties shall negotiate in good faith to amend such ratio or requirement to
preserve the original intent thereof in light of such change in GAAP (subject
to the approval of the Required Lenders), provided that, until so amended, such
ratio or requirement shall continue to be computed in accordance with GAAP
prior to such change therein and the Borrowers shall provide to the Agent and
the Lenders reconciliation statements showing the difference in such
calculation, together with the delivery of monthly, quarterly and annual
financial statements required hereunder.



     9.9 Severability of Provisions. Any provision in any Loan Document that
is held to be inoperative, unenforceable, or invalid in any jurisdiction shall,
as to that jurisdiction, be inoperative, unenforceable, or invalid without
affecting the remaining provisions in that jurisdiction or the operation,
enforceability, or validity of that provision in any other jurisdiction, and to
this end the provisions of all Loan Documents are declared to be severable.



     9.10 Nonliability of Lenders. The relationship between any Loan Party on
the one hand and the Lenders, the LC Issuer and the Agent on the other hand
shall be solely that of debtor and creditor. Neither the Agent, the Arranger,
the LC Issuer nor any Lender shall have any fiduciary responsibilities to any
Loan Party. Neither the Agent, the Arranger, the LC Issuer nor any Lender
undertakes any responsibility to any Loan Party to review or inform such Loan
Party of any matter in connection with any phase of any Loan Party’s business
or operations. The Loan Parties agree that neither
the Agent, the Arranger, the LC Issuer nor any Lender shall have liability
to any Loan Party (whether sounding in tort, contract or otherwise) for losses
suffered by any Loan Party in connection with, arising out of, or in any way
related to, the transactions contemplated and the relationship established by
the Loan Documents, or any act, omission or event occurring in connection
therewith, unless it is determined in a final non-appealable judgment by a
court of competent jurisdiction that such losses resulted from the gross
negligence or willful misconduct of the party from which recovery is sought.
Neither the Agent, the Arranger, the LC Issuer nor any Lender shall have any
liability with respect to, and each Loan Party hereby waives, releases and
agrees not to sue for, any special, indirect, consequential or punitive damages
suffered by any Loan Party in connection with, arising out of, or in any way
related to the Loan Documents or the transactions contemplated thereby.



     9.11 Confidentiality. The Agent and each Lender agrees to hold any
confidential information which it may receive from the Borrower in connection
with this Agreement in confidence, except for disclosure (a) to its Affiliates
and to the Agent and any other Lender and their respective Affiliates, (b) to
legal counsel, accountants, and other professional advisors to such Lender or
to a Transferee, (c) to regulatory officials, (d) to any Person as requested
pursuant to or as required by law, regulation, or legal process, (e) to any
Person in connection with any



97









 




legal proceeding to which it is a party, (f) to
its direct or indirect contractual counterparties in swap agreements or to
legal counsel, accountants and other professional advisors to such
counterparties, (g) permitted by Section 12.4, and (h) to rating agencies if
requested or required by such agencies in connection with a rating relating to
the Credit Extensions hereunder. Without limiting Section 9.4, the Borrowers
agree that the terms of this Section 9.11 shall set forth the entire agreement
between the Borrowers and each Lender (including the Agent) with respect to any
confidential information previously or hereafter received by such Lender in
connection with this Agreement, and this Section 9.11 shall supersede any and
all prior confidentiality agreements entered into by such Lender with respect
to such confidential information. Notwithstanding anything herein to the
contrary, confidential information shall not include, and each party to any of
the Loan Documents and their respective Affiliates (and the respective
partners, directors, officers, employees, advisors, representatives and other
agents of each of the foregoing and their Affiliates) may disclose to any and
all Persons, without limitation of any kind, (i) any information with respect
to the U.S. federal and state income tax treatment of the transactions
contemplated hereby and any facts that may be relevant to understanding such
tax treatment, which facts shall not include for this purpose the names of the
parties or any other Person named herein, or information that would permit
identification of the parties or such other Persons, or any pricing terms or
other nonpublic business or financial information that is unrelated to such tax
treatment or facts, and (ii) all materials of any kind (including opinions or
other tax analyses) relating to such tax treatment or facts that are provided
to any of the Persons referred to above, and it is hereby confirmed that each
of the Persons referred to above has been authorized to make such disclosures
since the commencement of discussions regarding the transactions contemplated
hereby.




     9.12 Nonreliance. Each Lender hereby represents that it is not relying on or looking to
any Margin Stock for the repayment of the Credit Extensions provided for
herein.



     9.13 Disclosure. Each Loan Party and each Lender hereby acknowledges and
agrees that Bank One and/or its Affiliates from time to time may hold
investments in, make other loans to or have other relationships with any of the
Loan Parties and their respective Affiliates.



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     9.14 Amendment and Restatement. This Agreement is an amendment and
restatement of the Original Loan Agreement. All “Obligations” under the
Original Loan Agreement and all Liens securing payment of “Obligations” under
the Original Loan Agreement shall in all respects be continuing and this
Agreement shall not be deemed to evidence or result in a novation or repayment
and re-borrowing of such “Obligations”. This Agreement shall supersede the
Original Loan Agreement. From and after the Effective Date, this Agreement
shall govern the terms of the “Obligations” under the Original Loan Agreement.
To the extent not replaced by Loan Documents dated as of the Closing Date, any
“Loan Documents” (as defined in the Original Loan Agreement) executed in
connection with the Original Loan Agreement (other than any such Loan Document
that is specifically terminated by the parties thereto) shall continue to be
effective, and all references in those prior Loan Documents to the “Loan
Agreement,” the “Agreement” or similar references, shall be deemed to refer to
this Agreement without further amendment thereof.



ARTICLE X




THE AGENT




     10.1 Appointment; Nature of Relationship. Bank One, NA is hereby
appointed by each of the Lenders as its contractual representative (herein
referred to as the “Agent”) hereunder and under each other Loan Document, and
each of the Lenders irrevocably authorizes the Agent to act as the contractual
representative of such Lender with the rights and duties expressly set forth
herein and in the other Loan Documents. The Agent agrees to act as such
contractual representative upon the express conditions contained in this
Article X. Notwithstanding the use of the defined term “Agent,” it is
expressly understood and agreed that the Agent shall not have any fiduciary
responsibilities to any Lender by reason of this Agreement or any other Loan
Document and that the Agent is merely acting as the contractual representative
of the Lenders with only those duties as are expressly set forth in this
Agreement and the other Loan Documents. In its capacity as the Lenders’
contractual representative, the Agent (a) does not hereby assume any fiduciary
duties to any of the Lenders, (b) is a “representative” of the Lenders within
the meaning of the term “secured party” as defined in the Texas Uniform
Commercial Code and (c) is acting as an independent contractor, the rights and
duties of which are limited to those expressly set forth in this Agreement and
the other Loan Documents. Each of the Lenders hereby agrees to assert no claim
against the Agent on any agency theory or any other theory of liability for
breach of fiduciary duty, all of which claims each Lender hereby waives.



     10.2 Powers. The Agent shall have and may exercise such powers under the
Loan Documents as are specifically delegated to the Agent by the terms of each
thereof, together with such powers as are reasonably incidental thereto. The
Agent shall have no implied duties to the Lenders, or any obligation to the
Lenders to take any action thereunder except any action specifically provided
by the Loan Documents to be taken by the Agent.



     10.3 General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrowers, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
to the extent such action or inaction is determined in a final non-



99









 




appealable
judgment by a court of competent jurisdiction to have arisen from the gross
negligence or willful misconduct of such Person.




     10.4 No Responsibility for Credit Extensions, Recitals, etc. Neither the
Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into, or verify (a) any
statement, warranty or representation made in connection with any Loan Document
or any borrowing hereunder; (b) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document, including,
without limitation, any agreement by an obligor to furnish information directly
to each Lender; (c) the satisfaction of any condition specified in Article IV,
except receipt of items required to be delivered solely to the Agent; (d) the
existence or possible existence of any Default or Unmatured Default; (e) the
validity, enforceability, effectiveness, sufficiency or genuineness of any Loan
Document or any other instrument or writing furnished in connection therewith;
(f) the value, sufficiency, creation, perfection or priority of any Lien in any
Collateral; or (g) the financial condition of any Loan Party, any Guarantor or
any Affiliate of any Loan Party.



     10.5 Action on Instructions of the Lenders. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any other Loan Document in accordance with written instructions signed by the
Required Lenders, and such instructions and any action taken or failure to act
pursuant thereto shall be binding on all of the Lenders. The Lenders hereby
acknowledge that the Agent shall be under no duty to take any discretionary
action permitted to be taken by it pursuant to the provisions of this Agreement
or any other Loan Document unless it shall be requested in writing to do so by
the Required Lenders. The Agent shall be fully justified in failing or
refusing to take any action hereunder and under any other Loan Document unless
it shall first be indemnified to its satisfaction by the Lenders pro rata
against any and all liability, cost and expense that it may incur by reason of
taking or continuing to take any such action.



     10.6 Employment of Agents and Counsel. The Agent may execute
any of its duties as the Agent hereunder and
under any other Loan Document by or through employees, agents, and
attorneys-in-fact and shall not be answerable to the Lenders, except as to
money or securities received by the Agent or its authorized agents, for the
default or misconduct of any such agents or attorneys-in-fact selected by it
with reasonable care. The Agent shall be entitled to advice of counsel
concerning the contractual arrangement between the Agent and the Lenders and
all matters pertaining to the Agent’s duties hereunder and under any other Loan
Document.



     10.7 Reliance on Documents; Counsel. The Agent shall be entitled to rely
upon any Note, notice, consent, certificate, affidavit, letter, telegram,
facsimile, telex, electronic mail message, statement, paper or document
believed by it to be genuine and correct and to have been signed or sent by the
proper person or persons, and, in respect to legal matters, upon the opinion of
counsel selected by the Agent, which counsel may be employees of the Agent.
For purposes of determining compliance with the conditions specified in
Sections 4.1 and 4.2, each Lender that has signed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter required thereunder to be consented to or approved by
or acceptable or satisfactory to a Lender unless the Agent shall have received
notice from such Lender prior to the applicable date specifying its objection
thereto.



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     10.8 Agent’s Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (or, if the Commitments have been terminated, in proportion to
their Commitments immediately prior to such termination) (a) for any amounts
not reimbursed by the Borrowers for which the Agent is entitled to
reimbursement by the Borrowers under the Loan Documents, (b) for any other
expenses incurred by the Agent on behalf of the Lenders, in connection with the
preparation, execution, delivery, administration and enforcement of the Loan
Documents (including, without limitation, for any expenses incurred by the
Agent in connection with any dispute between the Agent and any Lender or
between two or more of the Lenders) and (c) for any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising out
of the Loan Documents or any other document delivered in connection therewith
or the transactions contemplated thereby (including, without limitation, for
any such amounts incurred by or asserted against the Agent in connection with
any dispute between the Agent and any Lender or between two or more of the
Lenders), or the enforcement of any of the terms of the Loan Documents or of
any such other documents, provided that, (i) no Lender shall be liable for any
of the foregoing to the extent any of the foregoing is found in a final
non-appealable judgment by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of the Agent and (ii) any
indemnification required pursuant to Section 3.5(g) shall, notwithstanding the
provisions of this Section 10.8, be paid by the relevant Lender in accordance
with the provisions thereof. The obligations of the Lenders under this Section
10.8 shall survive payment of the Obligations and termination of this
Agreement.



     10.9 Notice of Default. The Agent shall not be deemed to have knowledge or notice of the
occurrence of any Default or Unmatured Default hereunder unless the Agent has
received written notice from a Lender, any Borrower or the Borrower
Representative referring to this Agreement describing such Default or Unmatured
Default and stating that such notice is a “notice of default.” In the event
that the Agent receives such a notice, the Agent shall give prompt notice
thereof to the Lenders; provided, that, the Agent shall not be liable to any
Lender for any failure to do so, except to the extent that such failure is
attributable to the Agent’s gross negligence or willful misconduct.



     10.10 Rights as a Lender. In the event the Agent is a Lender, the Agent
shall have the same rights and powers hereunder and under any other Loan
Document with respect to its Commitment and its Credit Extensions as any Lender
and may exercise the same as though it were not the Agent, and the term
“Lender” or “Lenders” shall, at any time when the Agent is a Lender, unless the
context otherwise indicates, include the Agent in its individual capacity. The
Agent and its Affiliates may accept deposits from, lend money to, and generally
engage in any kind of trust, debt, equity or other transaction, in addition to
those contemplated by this Agreement or any other Loan Document, with any Loan
Party in which such Loan Party is not restricted hereby from engaging with any
other Person, all as if Bank One were not the Agent and without any duty to
account therefor to Lenders. Bank One and its Affiliates may accept fees and
other consideration from any Loan Party for services in connection with this
Agreement or otherwise without having to account for the same to Lenders. The
Agent in its individual capacity, is not obligated to remain a Lender.



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     10.11 Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent, the Arranger or any other
Lender and based on the financial statements prepared by the Loan Parties and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent, the Arranger or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents. Except for any notice, report,
document, credit information or other information expressly required to be
furnished to the Lenders by the Agent or Arranger hereunder, neither the Agent
nor the Arranger shall have any duty or responsibility (either initially or on
a continuing basis) to provide any Lender with any notice, report, document,
credit information or other information concerning the affairs, financial
condition or business of the Borrowers or any of their Affiliates that may come
into the possession of the Agent or Arranger (whether or not in their
respective capacity as Agent or Arranger) or any of their Affiliates.



     10.12 Successor Agent. The Agent may resign at any time by giving written
notice thereof to the Lenders and the Borrower Representative, such resignation
to be effective upon the appointment of a
successor Agent or, if no successor Agent has been appointed, forty-five
days after the retiring Agent gives notice of its intention to resign. The
Agent may be removed at any time with or without cause by written notice
received by the Agent from the Required Lenders, such removal to be effective
on the date specified by the Required Lenders. Upon any such resignation or
removal, the Required Lenders shall have the right to appoint (with the consent
of Borrower Representative, which shall not be unreasonably withheld or
delayed), on behalf of the Borrowers and the Lenders, a successor Agent. If no
successor Agent shall have been so appointed by the Required Lenders within
thirty days after the resigning Agent’s giving notice of its intention to
resign, then the resigning Agent may appoint, on behalf of the Borrowers and
the Lenders, a successor Agent. Notwithstanding the previous sentence, the
Agent may at any time without the consent of the Borrowers or any Lender,
appoint any of its Affiliates which is a commercial bank as a successor Agent
hereunder. If the Agent has resigned or been removed and no successor Agent
has been appointed, the Lenders may perform all the duties of the Agent
hereunder and the Borrowers shall make all payments in respect of the
Obligations to the applicable Lender and for all other purposes shall deal
directly with the Lenders. No successor Agent shall be deemed to be appointed
hereunder until such successor Agent has accepted the appointment. Any such
successor Agent shall be a commercial bank having capital and retained earnings
of at least $100,000,000. Upon the acceptance of any appointment as the Agent
hereunder by a successor Agent, such successor Agent shall thereupon succeed to
and become vested with all the rights, powers, privileges and duties of the
resigning or removed Agent. Upon the effectiveness of the resignation or
removal of the Agent, the resigning or removed Agent shall be discharged from
its duties and obligations hereunder and under the Loan Documents. After the
effectiveness of the resignation or removal of an Agent, the provisions of this
Article X shall continue in effect for the benefit of such Agent in respect of
any actions taken or omitted to be taken by it while it was acting as the Agent
hereunder and under the other Loan Documents. In the event that there is a
successor to the Agent by merger, or the Agent assigns its duties and
obligations to an Affiliate pursuant to this Section 10.12, then the term
“Prime Rate” as used in this Agreement shall mean the prime rate, base rate or
other analogous rate of the new Agent.



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     10.13 Delegation to Affiliates. The Borrowers and the Lenders agree that
the Agent may delegate any of its duties under this Agreement to any of its
Affiliates. Any such Affiliate (and such Affiliate’s directors, officers,
agents and employees) which performs duties in connection with this Agreement
shall be entitled to the same benefits of the indemnification, waiver and other
protective provisions to which the Agent is entitled under Articles IX and X.



     10.14 Execution of Loan Documents. The Lenders hereby empower and
authorize the Agent, on behalf of the Agent and the Lenders, to execute and
deliver to the Loan Parties the Loan Documents and all related agreements,
certificates, documents, or instruments as shall be necessary or appropriate to
effect the purposes of the Loan Documents. Each Lender agrees that any action
taken by the Agent or the Required Lenders in accordance with the terms of this
Agreement or the other Loan Documents, and the exercise by the Agent or the
Required Lenders of their respective powers set forth therein or herein,
together with such other powers that are reasonably incidental thereto,
shall be binding upon all of the Lenders. The Lenders acknowledge that
all of the Obligations hereunder constitute one debt, secured pari passu by all
of the Collateral.



     10.15 Collateral Matters.




     (a) The Lenders hereby irrevocably authorize the Agent, at its
option and in its sole discretion, to release or subordinate (as
applicable) any Liens granted to the Agent by the Loan Parties on
any Collateral (i) upon the termination of the Aggregate
Commitment, payment and satisfaction in full in cash of all
Obligations (other than Unliquidated Secured Obligations), and the
cash collateralization of all Unliquidated Secured Obligations in a
manner satisfactory to each affected Lender, (ii) constituting
Property being sold or disposed of if the Loan Party disposing of
such Property certifies to the Agent that the sale or disposition
is made in compliance with the terms of this Agreement (and the
Agent may rely conclusively on any such certificate, without
further inquiry), (iii) constituting Property in which no Loan
Party has at any time during the term of this Agreement owned any
interest, (iv) constituting property leased to a Loan Party under a
lease which has expired or been terminated in a transaction
permitted under this Agreement, (v) owned by or leased to an Loan
Party which is subject to a purchase money security interest or
which is the subject of a Capitalized Lease, in either case,
entered into by such Loan Party pursuant to Section 6.17(c), or
(vi) as required to effect any sale or other disposition of such
Collateral in connection with any exercise of remedies of the Agent
and the Lenders pursuant to Section 8.1. Upon request by the Agent
at any time, the Lenders will confirm in writing the Agent’s
authority to release any Liens upon particular types or items of
Collateral pursuant to this Section 10.15. Except as provided in
the preceding sentence, the Agent will not release any Liens on
Collateral without the prior written authorization of the Required
Lenders; provided that, the Agent may in its discretion, release
its Liens on Collateral valued in the aggregate not in excess of
$6,000,000 during any calendar year without the prior written
authorization of the Lenders.



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     (b) Upon receipt by the Agent of any authorization required
pursuant to Section 10.15(a) from the Required Lenders of the
Agent’s authority to release any Liens upon particular types or
items of Collateral, and upon at least five Business Days prior
written request by the Loan Parties, the Agent shall (and is hereby
irrevocably authorized by the Lenders to) execute such documents as
may be necessary to evidence the release of its Liens upon such
Collateral; provided that, (i) the Agent shall not be required to
execute any such document on terms which, in the Agent’s opinion,
would expose the Agent to liability or create any obligation or
entail any consequence other than the release of such Liens without
recourse or warranty and (ii) such release shall not in any manner
discharge, affect, or impair the Obligations or any Liens (other
than those expressly being released) upon (or obligations of the
Loan Parties in respect of) all interests retained by the Loan
Parties, including the proceeds of any sale, all of which shall
continue to constitute part of the Collateral.




     (c) The Agent shall have no obligation whatsoever to any of
the Lenders to assure that the Collateral exists or is owned by the
Loan Parties or is cared for, protected, or insured or has been
encumbered, or that the Liens granted to the Agent therein have
been properly or sufficiently or lawfully created, perfected,
protected, or enforced or are entitled to any particular priority,
or to exercise at all or in any particular manner or under any duty
of care, disclosure, or fidelity, or to continue exercising, any of
the rights, authorities, and powers granted or available to the
Agent pursuant to any of the Loan Documents, it being understood
and agreed that in respect of the Collateral, or any act, omission,
or event related thereto, the Agent may act in any manner it may
deem appropriate, in its sole discretion given the Agent’s own
interest in the Collateral in its capacity as one of the Lenders
and that the Agent shall have no other duty or liability whatsoever
to any Lender as to any of the foregoing.




     (d) Each Lender hereby appoints each other Lender as its agent
for the purpose of perfecting Liens, for the benefit of the Agent
and the Lenders, in assets which, in accordance with Article 9 of
the UCC or any other applicable law can be perfected only by
possession. Should any Lender (other than the Agent) obtain
possession of any such Collateral, such Lender shall notify the
Agent thereof, and, promptly upon the Agent’s request therefor
shall deliver such Collateral to the Agent or otherwise deal with
such Collateral in accordance with the Agent’s instructions.




     (e) Each Lender hereby agrees as follows: (a) such Lender is
deemed to have requested that the Agent furnish such Lender,
promptly after it becomes available, a copy of each Report prepared
by or on behalf of the Agent; (b) such Lender expressly agrees and
acknowledges that neither Bank One nor the Agent (i) makes any
representation or warranty, express or implied, as to the
completeness or accuracy of any Report or any of the information
contained therein, or (ii) shall be liable for any information
contained in any Report; (c) such Lender expressly agrees and
acknowledges that the Reports are not comprehensive audits or
examinations, that the Agent, Bank One, or any other



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party
performing any audit or examination will inspect only specific
information regarding the Loan Parties and will rely significantly
upon the Loan Parties’ books and records, as well as on
representations of the Loan Parties’ personnel and that Bank One
undertakes no obligation to update, correct or supplement the
Reports; (d) such Lender agrees to keep all Reports confidential
and strictly for its internal use, not share the Report with any
Loan Party and not to distribute any Report to any other Person
except as otherwise permitted pursuant to this Agreement; and (e)
without limiting the generality of any other indemnification
provision contained in this Agreement, such Lender agrees (i) that
neither Bank One nor the Agent shall be liable to such Lender or
any other Person receiving a copy of the Report for any inaccuracy
or omission contained in or relating to a Report, (ii) to conduct
its own due diligence investigation and make credit decisions with
respect to the Loan Parties based on such documents as such Lender
deems appropriate without any reliance on the Reports or on the
Agent or Bank One, (iii) to hold the Agent and any such other
Person preparing a Report harmless from
any action the indemnifying Lender may take or conclusion the
indemnifying Lender may reach or draw from any Report in connection
with any Credit Extensions that the indemnifying Lender has made or
may make to the Loan Parties, or the indemnifying Lender’s
participation in, or the indemnifying Lender’s purchase of, any
Obligations and (iv) to pay and protect, and indemnify, defend, and
hold the Agent and any such other Person preparing a Report
harmless from and against, the claims, actions, proceedings,
damages, costs, expenses, and other amounts (including reasonable
attorney fees) incurred by the Agent and any such other Person
preparing a Report as the direct or indirect result of any third
parties who might obtain all or part of any Report through the
indemnifying Lender.



     10.16 Co-Agents, Documentation Agent, Syndication Agent, etc. Neither any
of the Lenders identified in this Agreement as a “co-agent” nor the
Documentation Agent or the Syndication Agent shall have any right, power,
obligation, liability, responsibility or duty under this Agreement other than
those applicable to all Lenders as such. Without limiting the foregoing, none
of such Lenders shall have or be deemed to have a fiduciary relationship with
any Lender. Each Lender hereby makes the same acknowledgments with respect to
such Lenders as it makes with respect to the Agent in Section 10.11.



ARTICLE XI




SETOFF; RATABLE PAYMENTS




     11.1 Setoff. In addition to, and without limitation of, any rights of the
Lenders under applicable law, if any Loan Party becomes insolvent, however
evidenced, or any Default occurs and is continuing, any and all deposits
(including all account balances, whether provisional or final and whether or
not collected or available) and any other Indebtedness at any time held or
owing by any Lender or any Affiliate of any Lender to or for the credit or
account of any Borrower may be offset and applied toward the payment of the
Secured Obligations owing to such Lender, whether or not the Secured
Obligations, or any part thereof, shall then be due.




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     11.2 Ratable Payments. If any Lender, whether by setoff or otherwise, has
payment made to it upon its Credit Exposure (other than payments received
pursuant to Section 3.1, 3.2, 3.4 or 3.5) in a greater proportion than that
received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Aggregate Credit Exposure held by the other Lenders
so that after such purchase each Lender will hold its Pro Rata Share of the
Aggregate Credit Exposure. If any Lender, whether in connection with setoff or
amounts which might be subject to setoff or otherwise, receives collateral or
other protection for its Secured Obligations or such amounts which may be
subject to setoff, such Lender agrees, promptly upon demand, to take such
action necessary such that all Lenders share in the benefits of such collateral
ratably in proportion to respective Pro Rata Share of the Aggregate Credit
Exposure. In case any such payment is disturbed by legal process, or
otherwise, appropriate further adjustments shall be made.



ARTICLE XII




BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS




     12.1 Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Loan Parties
and the Lenders and their respective successors and assigns permitted hereby,
except that (a) the Loan Parties shall not have the right to assign their
rights or obligations under the Loan Documents without the prior written
consent of each Lender, (b) any assignment by any Lender must be made in
compliance with Section 12.3, and (c) any transfer by Participation must be
made in compliance with Section 12.2. Any attempted assignment or transfer by
any party not made in compliance with this Section 12.1 shall be null and void,
unless such attempted assignment or transfer is treated as a participation in
accordance with Section 12.2. The parties to this Agreement acknowledge that
clause (b) of this Section 12.1 relates only to absolute assignments and this
Section 12.1 does not prohibit assignments creating security interests,
including, without limitation, (x) any pledge or assignment by any Lender of
all or any portion of its rights under this Agreement and any Note to a Federal
Reserve Bank or (y) in the case of a Lender which is a Fund, any pledge or
assignment of all or any portion of its rights under this Agreement and any
Note to its trustee in support of its obligations to its trustee; provided
however, that no such pledge or assignment creating a security interest shall
release the transferor Lender from its obligations hereunder unless and until
the parties thereto have complied with the provisions of Section 12.3. The
Agent may treat the Person which made any Credit Extension or which holds any
Note as the owner thereof for all purposes hereof unless and until such Person
complies with Section 12.3; provided however, that the Agent may in its
discretion (but shall not be required to) follow instructions from the Person
which made any Credit Extension or which holds any Note to direct payments
relating to such Credit Extension or Note to another Person. Any assignee of
the rights to any Credit Extension or any Note agrees
by acceptance of such assignment to be bound by all the terms and
provisions of the Loan Documents. Any request, authority or consent of any
Person, who at the time of making such request or giving such authority or
consent is the owner of the rights to any Credit Extension (whether or not a
Note has been issued in evidence thereof), shall be conclusive and binding on
any subsequent holder or assignee of the rights to such Credit Extension.



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     12.2 Participations.




     (a) Permitted Participants; Effect. Any Lender may at any
time sell to one or more banks or other entities (“Participants”)
participating interests in any Credit Exposure of such Lender, any
Note held by such Lender, any Commitment of such Lender or any
other interest of such Lender under the Loan Documents. In the
event of any such sale by a Lender of participating interests to a
Participant, such Lender’s obligations under the Loan Documents
shall remain unchanged, such Lender shall remain solely responsible
to the other parties hereto for the performance of such
obligations, such Lender shall remain the owner of its Credit
Exposure and the holder of any Note issued to it in evidence
thereof for all purposes under the Loan Documents, all amounts
payable by the Borrowers under this Agreement shall be determined
as if such Lender had not sold such participating interests, and
the Borrowers and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender’s rights
and obligations under the Loan Documents.




     (b) Voting Rights. Each Lender shall retain the sole right to
approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other
than any amendment, modification or waiver with respect to any
Credit Extension or Commitment in which such Participant has an
interest which would require consent of all of the Lenders pursuant
to the terms of Section 8.3 or of any other Loan Document.




     (c) Benefit of Certain Provisions. Each Loan Party agrees
that each Participant shall be deemed to have the right of setoff
provided in Section 11.1 in respect of its participating interest
in amounts owing under the Loan Documents to the same extent as if
the amount of its participating interest were owing directly to it
as a Lender under the Loan Documents, provided that, each Lender
shall retain the right of setoff provided in Section 11.1 with
respect to the amount of participating interests sold to each
Participant. The Lenders agree to share with each Participant, and
each Participant, by exercising the right of setoff provided in
Section 11.1, agrees to share with each Lender, any amount received
pursuant to the exercise of its right of setoff, such amounts to be
shared in accordance with Section 11.2 as if each Participant were
a Lender. The Borrowers further agree that each Participant shall
be entitled to the benefits of Sections 3.1, 3.2, 3.4 and 3.5 to
the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to Section 12.3, provided that, (i)
a Participant shall not be entitled to receive any greater payment
under Section 3.1, 3.2 or 3.5 than the Lender who sold the
participating interest to such Participant would have received had
it retained such interest for its own account, unless the sale of
such interest to
such Participant is made with the prior written consent of the
Borrower Representative, and (ii) any Participant not incorporated
under the laws of the U.S. or any state thereof agrees to comply
with the provisions of Section 3.5 to the same extent as if it were
a Lender.



     12.3 Assignments.



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     (a) Permitted Assignments. Any Lender may at any time assign
to one or more banks or other entities (“Purchasers”) all or any
part of its rights and obligations under the Loan Documents. Such
assignment shall be substantially in the form of Exhibit G (an
“Assignment Agreement”). Each such assignment with respect to a
Purchaser which is not a Lender or an Affiliate of a Lender or an
Approved Fund shall either be in an amount equal to the entire
applicable Commitment and Credit Extensions of the assigning Lender
or (unless each of the Borrower Representative and the Agent
otherwise consents) be in an aggregate amount not less than
$5,000,000 in the case of any assignment of a Revolving Commitment
and $1,000,000 in the case of any assignment of a Term Loan or Term
Loan Commitment. The amount of the assignment shall be based on
the Commitment or outstanding Credit Extensions (if the Commitment
has been terminated) subject to the assignment, determined as of
the date of such assignment or as of the “Trade Date,” if the
“Trade Date” is specified in the assignment.




     (b) Consents. The consent of the Borrower Representative
shall be required prior to an assignment becoming effective unless
the Purchaser is a Lender, an Affiliate of a Lender or an Approved
Fund, provided that, the consent of the Borrower Representative
shall not be required if a Default has occurred and is continuing.
The consent of the Agent shall be required prior to an assignment
becoming effective unless the Purchaser is a Lender with a
Revolving Commitment (in the case of an assignment of a Revolving
Commitment) or is a Lender, an Affiliate of a Lender or an Approved
Fund (in the case of an assignment of any other Commitment or
Loans). The consent of the LC Issuer shall be required prior to an
assignment of a Revolving Commitment becoming effective unless the
Purchaser is a Lender with a Revolving Commitment. Any consent
required under this Section 12.3(b) shall not be unreasonably
withheld or delayed.




     (c) Effect; Effective Date. Upon (i) delivery to the Agent of
a duly executed Assignment Agreement, together with any consents
required by Sections 12.3(a) and 12.3(b), and (ii) payment of a
$3,500 fee to the Agent for processing such assignment (unless such
fee is waived by the Agent), such Assignment Agreement shall become
effective on the effective date specified by the Agent in such
Assignment Agreement. The Assignment Agreement shall contain a
representation by the Purchaser to the effect that none of the
consideration used to make the purchase of the Commitment and
Credit Exposure under the applicable Assignment Agreement
constitutes “plan assets” as defined under ERISA and that the
rights and interests of the Purchaser in and under the Loan
Documents will not
be “plan assets” under ERISA. On and after the effective date
of such Assignment Agreement, such Purchaser shall for all purposes
be a Lender party to this Agreement and any other Loan Document
executed by or on behalf of the Lenders and shall have all the
rights and obligations of a Lender under the Loan Documents, to the
same extent as if it were an original party thereto, and the
transferor Lender shall be released with respect to the Commitment
and Credit Exposure assigned to such Purchaser (but not any other
liabilities accrued prior to



108









 






such assignment, unless assumed by
such Purchaser) without any further consent or action by the
Borrowers, the Lenders or the Agent. In the case of an Assignment
Agreement covering all of the assigning Lender’s rights and
obligations under this Agreement, such Lender shall cease to be a
Lender hereunder but shall continue to be entitled to the benefits
of, and subject to, those provisions of this Agreement and the
other Loan Documents which survive payment of the Obligations and
termination of the applicable agreement. Any assignment or
transfer by a Lender of rights or obligations under this Agreement
that does not comply with this Section 12.3 shall be treated for
purposes of this Agreement as a sale by such Lender of a
participation in such rights and obligations in accordance with
Section 12.2. Upon the consummation of any assignment to a
Purchaser pursuant to this Section 12.3(c), the transferor Lender,
the Agent and the Borrowers shall, if the transferor Lender or the
Purchaser desires that its Loans be evidenced by Notes, make
appropriate arrangements so that new Notes or, as appropriate,
replacement Notes are issued to such transferor Lender and new
Notes or, as appropriate, replacement Notes, are issued to such
Purchaser, in each case in principal amounts reflecting their
respective Commitments, as adjusted pursuant to such assignment.




     (d) Register. The Agent, acting solely for this purpose as an
agent of the Borrowers, shall maintain at one of its offices in the
U.S. a copy of each Assignment Agreement delivered to it and a
register for the recordation of the names and addresses of the
Lenders, and the Commitments of, and principal amounts of the
Credit Extensions owing to, each Lender pursuant to the terms
hereof from time to time (the “Register”). The entries in the
Register shall be conclusive, and the Borrowers, the Agent and the
Lenders may treat each Person whose name is recorded in the
Register pursuant to the terms hereof as a Lender hereunder for all
purposes of this Agreement, notwithstanding notice to the contrary.
The Register shall be available for inspection by the Borrowers
and any Lender, at any reasonable time and from time to time upon
reasonable prior notice.



     12.4 Dissemination of Information. Each Loan Party authorizes each Lender
to disclose to any Participant or Purchaser or any other Person acquiring an
interest in the Loan Documents by operation of law (each a “Transferee”) and
any prospective Transferee any and all information in such Lender’s possession
concerning the creditworthiness of the Loan Parties, including without
limitation any information contained in any Reports; provided that, each
Transferee and prospective Transferee agrees to be bound by Section 9.11 of
this Agreement.



     12.5 Tax Treatment. If any interest in any Loan Document is transferred
to any Transferee which is not incorporated under the laws of the U.S. or any
state thereof, the transferor Lender shall cause such Transferee, concurrently
with the effectiveness of such transfer, to comply with the provisions of
Section 3.5(d).



     12.6 Assignment by LC Issuer. Notwithstanding anything contained herein,
if at any time Bank One assigns all of its Revolving Commitment and Revolving
Loans pursuant to Section 12.3, Bank One may, upon thirty days’ notice to the
Borrower Representative and the



109









 







Lenders, resign as LC Issuer. In the event of
any such resignation as LC Issuer, the Borrower Representative shall be
entitled to appoint from among the Lenders a successor LC Issuer hereunder;
provided however, that no failure by the Borrower Representative to appoint any
such successor shall affect the resignation of Bank One as LC Issuer. If Bank
One resigns as LC Issuer, it shall retain all the rights and obligations of the
LC Issuer hereunder with respect to the Facility LCs outstanding as of the
effective date of its resignation as LC Issuer and all LC Obligations with
respect thereto (including the right to require the Lenders to make Revolving
Loans or fund risk participations in outstanding Reimbursement Obligations
pursuant to Section 2.1.2(d)).



ARTICLE XIII




NOTICES




     13.1 Notices; Effectiveness; Electronic Communications.




     (a) Notices Generally. Except in the case of notices and
other communications expressly permitted to be given by telephone
(and except as provided in paragraph (b) below), all notices and
other communications provided for herein shall be in writing and
shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopier as follows:




     (i) if to any Loan Party, at its address or telecopier
number set forth on the signature page hereof;




     (ii) if to the Agent, at its address or telecopier
number set forth on the signature page hereof;




     (iii) if to the LC Issuer, at its address or telecopier
number set forth on the signature page hereof;




     (iv) if to a Lender, to it at its address or telecopier
number set forth in its Administrative Questionnaire.



     Notices sent by hand or overnight courier service, or mailed by certified
or registered mail, shall be deemed to have been given when received; notices
sent by telecopier shall be
deemed to have been given when sent (except that, if not given during
normal business hours for the recipient, shall be deemed to have been given at
the opening of business on the next Business Day for the recipient). Notices
delivered through electronic communications to the extent provided in paragraph
(b) below, shall be effective as provided in said paragraph (b).




     (b) Electronic Communications. Notices and other
communications to the Lenders and the LC Issuer hereunder may be
delivered or furnished by electronic communication (including
e-mail and internet or intranet websites) pursuant to procedures
approved by the Agent or as otherwise determined by the Agent,
provided that, the foregoing shall not apply to notices to any
Lender or the LC Issuer pursuant to Article II if such Lender or
the LC Issuer, as applicable, has



110









 






notified the Agent that it is
incapable of receiving notices under such Article by electronic
communication. The Agent or any Loan Party may, in its respective
discretion, agree to accept notices and other communications to it
hereunder by electronic communications pursuant to procedures
approved by it or as it otherwise determines, provided that such
determination or approval may be limited to particular notices or
communications. Notwithstanding the foregoing, in every instance,
the Borrower Representative shall be required to provide paper
copies of the Compliance Certificates required by Section 6.1(e) to
the Agent.



          Unless the Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (such as by
the “return receipt requested” function, as available, return e-mail or other
written acknowledgement), provided that if such notice or other communication
is not given during the normal business hours of the recipient, such notice or
communication shall be deemed to have been given at the opening of business on
the next Business Day for the recipient, and (ii) notices or communications
posted to an Internet or intranet website shall be deemed received upon the
deemed receipt by the intended recipient at its e-mail address as described in
the foregoing clause (i) of notification that such notice or communication is
available and identifying the website address therefor.



     13.2 Change of Address, Etc. Any party hereto may change its address or
telecopier number for notices and other communications hereunder by notice to
the other parties hereto.



ARTICLE XIV




COUNTERPARTS




     This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement, and any of the parties hereto
may execute this Agreement by signing any such counterpart. This Agreement
shall be effective when it has been executed by the Loan Parties, the Agent,
the LC Issuer and the Lenders and each party has notified the Agent by
facsimile transmission or telephone that it has taken such action.



ARTICLE XV




GUARANTY




     15.1 Guaranty. Each Guarantor (other than those that have delivered a
separate Guaranty; each to be referred to in this Article XV as a Guarantor and
collectively as the Guarantors) hereby agrees that it is jointly and severally
liable for, and, as primary obligor and not merely as surety, absolutely and
unconditionally guarantees to the Lenders the prompt payment when due, whether
at stated maturity, upon acceleration or otherwise, and at all times
thereafter, of the Secured Obligations and all costs and expenses including,
without limitation, all court costs and attorneys’ and paralegals’ fees
(including allocated costs of in-house counsel and paralegals) and expenses
paid or incurred by the Agent, the LC Issuer and the Lenders in endeavoring to
collect all or any part of the Secured Obligations from, or in prosecuting any



111









 





action against, any Borrower, any Guarantor or any other guarantor of all or
any part of the Secured Obligations (such costs and expenses, together with the
Secured Obligations, collectively the “Guaranteed Obligations”). Each
Guarantor further agrees that the Guaranteed Obligations may be extended or
renewed in whole or in part without notice to or further assent from it, and
that it remains bound upon its guarantee notwithstanding any such extension or
renewal.



     15.2 Guaranty of Payment. This Guaranty is a guaranty of payment and not
of collection. Each Guarantor waives any right to require the Agent, the LC
Issuer or any Lender to sue any Borrower, any Guarantor, any other guarantor,
or any other person obligated for all or any part of the Guaranteed
Obligations, or otherwise to enforce its payment against any collateral
securing all or any part of the Guaranteed Obligations.



     15.3 No Discharge or Diminishment of Guaranty.




     (a) Except as otherwise provided for herein and to the extent
provided for herein, the obligations of each Guarantor hereunder
are unconditional and absolute and not subject to any reduction,
limitation, impairment or termination for any reason (other than
the indefeasible payment in full in cash of the Guaranteed
Obligations), including:




     (i) any claim of waiver, release, extension, renewal,
settlement, surrender, alteration, or compromise of any of
the Guaranteed Obligations, by operation of law or otherwise;




     (ii) any change in the corporate existence, structure or
ownership of any Borrower or any other guarantor of or other
person liable for any of the Guaranteed Obligations;




     (iii) any insolvency, bankruptcy, reorganization or
other similar proceeding affecting any Borrower, any
Guarantor, or any other guarantor of or other person liable
for any of the Guaranteed Obligations, or their
assets or any resulting release or discharge of any
obligation of any Borrower, any Guarantor, or any other
guarantor of or other person liable for any of the Guaranteed
Obligations; or




     (iv) the existence of any claim, setoff or other rights
which any Guarantor may have at any time against any
Borrower, any Guarantor, any other guarantor of the
Guaranteed Obligations, the Agent, the LC Issuer, any Lender,
or any other person, whether in connection herewith or in any
unrelated transactions.




     (b) The obligations of each Guarantor hereunder are not
subject to any defense or setoff, counterclaim, recoupment, or
termination whatsoever by reason of the invalidity, illegality, or
unenforceability of any of the Guaranteed Obligations or otherwise,
or any provision of applicable law or regulation purporting to
prohibit payment by any Borrower, any Guarantor or any other



112









 






guarantor of or other person liable for any of the Guaranteed
Obligations, of the Guaranteed Obligations or any part thereof.




     (c) Further, the obligations of any Guarantor hereunder are
not discharged or impaired or otherwise affected by:




     (i) the failure of the Agent, the LC Issuer or any
Lender to assert any claim or demand or to enforce any remedy
with respect to all or any part of the Guaranteed
Obligations;




     (ii) any waiver or modification of or supplement to any
provision of any agreement relating to the Guaranteed
Obligations;




     (iii) any release, non-perfection, or invalidity of any
indirect or direct security for the obligations of any
Borrower for all or any part of the Guaranteed Obligations or
any obligations of any other guarantor of or other person
liable for any of the Guaranteed Obligations;




     (iv) any action or failure to act by the Agent, the LC
Issuer or any Lender with respect to any collateral securing
any part of the Guaranteed Obligations;




     (v) any default, failure or delay, willful or otherwise,
in the payment or performance of any of the Guaranteed
Obligations, or any other circumstance, act, omission or
delay that might in any manner or to any extent vary the risk
of such Guarantor or that would otherwise operate as a
discharge of any Guarantor as a matter of law or equity
(other than the indefeasible payment in full in cash of the
Guaranteed Obligations).



     15.4 Defenses Waived. To the fullest extent permitted by applicable law,
each Guarantor hereby waives any defense based on or arising out of any defense
of any Borrower or any Guarantor or the
unenforceability of all or any part of the Guaranteed Obligations from any
cause, or the cessation from any cause of the liability of any Borrower or any
Guarantor, other than the indefeasible payment in full in cash of the
Guaranteed Obligations. Without limiting the generality of the foregoing, each
Guarantor irrevocably waives acceptance hereof, presentment, demand, protest
and, to the fullest extent permitted by law, any notice not provided for
herein, as well as any requirement that at any time any action be taken by any
person against any Borrower, any Guarantor, any other guarantor of any of the
Guaranteed Obligations, or any other person. The Agent may, at its election,
foreclose on any Collateral held by it by one or more judicial or nonjudicial
sales, accept an assignment of any such Collateral in lieu of foreclosure or
otherwise act or fail to act with respect to any collateral securing all or a
part of the Guaranteed Obligations, compromise or adjust any part of the
Guaranteed Obligations, make any other accommodation with any Borrower, any
Guarantor, any other guarantor or any other person liable on any part of the
Guaranteed Obligations or exercise any other right or remedy available to it
against any Borrower, any Guarantor, any other guarantor or any other person
liable on any of the Guaranteed Obligations, without affecting or impairing in
any way the liability of such Guarantor under this Guaranty except to the
extent the Guaranteed Obligations have been fully



113









 





and indefeasibly paid in
cash. To the fullest extent permitted by applicable law, each Guarantor waives
any defense arising out of any such election even though that election may
operate, pursuant to applicable law, to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of any Guarantor against
any Borrower, any other guarantor or any other person liable on any of the
Guaranteed Obligations, as the case may be, or any security.



     15.5 Rights of Subrogation. No Guarantor will assert any right, claim or
cause of action, including, without limitation, a claim of subrogation,
contribution or indemnification that it has against any Borrower, any
Guarantor, any person liable on the Guaranteed Obligations, or any collateral,
until the Loan Parties and the Guarantors have fully performed all their
obligations to the Agent, the LC Issuer and the Lender.



     15.6 Reinstatement; Stay of Acceleration. If at any time any payment of
any portion of the Guaranteed Obligations is rescinded or must otherwise be
restored or returned upon the insolvency, bankruptcy, or reorganization of any
Borrower or otherwise, each Guarantor’s obligations under this Guaranty with
respect to that payment shall be reinstated at such time as though the payment
had not been made and whether or not the Agent, the LC Issuer and the Lenders
are in possession of this Guaranty. If acceleration of the time for payment of
any of the Guaranteed Obligations is stayed upon the insolvency, bankruptcy or
reorganization of any Borrower, all such amounts otherwise subject to
acceleration under the terms of any agreement relating to the Guaranteed
Obligations shall nonetheless be payable by the Guarantors forthwith on demand
by the Lender.



     15.7 Information. Each Guarantor assumes all responsibility for being and
keeping itself informed of the Borrowers’ financial condition and assets, and
of all other circumstances bearing upon the risk of nonpayment of the
Guaranteed Obligations and the nature, scope and extent of the risks that each
Guarantor assumes and incurs under this Guaranty, and agrees that neither
the Agent, the LC Issuer nor any Lender shall have any duty to advise any
Guarantor of information known to it regarding those circumstances or risks.



     15.8 Termination. The Lenders may continue to make loans or extend credit
to any Borrower based on this Guaranty until five days after the Agent receives
written notice of termination from any Guarantor. Notwithstanding receipt of
any such notice, each Guarantor will continue to be liable to the Lender for
any Guaranteed Obligations created, assumed or committed to prior to the fifth
day after receipt of the notice, and all subsequent renewals, extensions,
modifications and amendments with respect to, or substitutions for, all or any
part of that Guaranteed Obligations.



     15.9 Taxes. All payments of the Guaranteed Obligations will be made by
each Guarantor free and clear of and without deduction for or on account of any
and all present or future taxes, levies, imposts, duties, charges, deductions
or withholdings of whatever nature imposed by any governmental authority with
respect to such payments, and any and all liabilities with respect to the
foregoing, but excluding franchise taxes and taxes imposed on overall net
income of the Lender by the U.S. or the jurisdiction in which the Lender’s
applicable Lending Installation is located (collectively, “Taxes”). If any
Guarantor is required by law to deduct any Taxes from or in respect of any sum
payable to the Lenders under this Guaranty, (a) the sum payable must be
increased as necessary so that after making all required deductions (including



114









 





deductions applicable to additional sums payable under this provision) the
Lenders receive an amount equal to the sum it would have received had no such
deductions been made, (b) the Guarantors must then make such deductions, and
must pay the full amount deducted to the relevant authority in accordance with
applicable law, and (c) the Guarantors must furnish to the Lender within
forty-five days after their due date certified copies of all official receipts
evidencing payment thereof.



     15.10 Severability. The provisions of this Guaranty are severable, and in
any action or proceeding involving any state corporate law, or any state,
federal or foreign bankruptcy, insolvency, reorganization or other law
affecting the rights of creditors generally, if the obligations of any
Guarantor under this Guaranty would otherwise be held or determined to be
avoidable, invalid or unenforceable on account of the amount of such
Guarantor’s liability under this Guaranty, then, notwithstanding any other
provision of this Guaranty to the contrary, the amount of such liability shall,
without any further action by the Guarantors or the Lenders, be automatically
limited and reduced to the highest amount that is valid and enforceable as
determined in such action or proceeding (such highest amount determined
hereunder being the relevant Guarantor’s “Maximum Liability.” This Section
with respect to the Maximum Liability of each Guarantor is intended solely to
preserve the rights of the Lenders to the maximum extent not subject to
avoidance under applicable law, and no Guarantor nor any other person or entity
shall have any right or claim under this Section with respect to such Maximum
Liability, except to the extent necessary so that the obligations of any
Guarantor hereunder shall not be rendered voidable under applicable law. Each
Guarantor agrees that the Guaranteed Obligations may at any time
and from time to time exceed the Maximum Liability of each Guarantor
without impairing this Guaranty or affecting the rights and remedies of the
Lenders hereunder, provided that, nothing in this sentence shall be construed
to increase any Guarantor’s obligations hereunder beyond its Maximum Liability.



     15.11 Contribution. In the event any Guarantor (a “Paying Guarantor”)
shall make any payment or payments under this Guaranty or shall suffer any loss
as a result of any realization upon any collateral granted by it to secure its
obligations under this Guaranty, each other Guarantor (each a “Non-Paying
Guarantor”) shall contribute to such Paying Guarantor an amount equal to such
Non-Paying Guarantor’s “Pro Rata Share” of such payment or payments made, or
losses suffered, by such Paying Guarantor. For purposes of this Article XV,
each Non-Paying Guarantor’s “Pro Rata Share” with respect to any such payment
or loss by a Paying Guarantor shall be determined as of the date on which such
payment or loss was made by reference to the ratio of (i) such Non-Paying
Guarantor’s Maximum Liability as of such date (without giving effect to any
right to receive, or obligation to make, any contribution hereunder) or, if
such Non-Paying Guarantor’s Maximum Liability has not been determined, the
aggregate amount of all monies received by such Non-Paying Guarantor from the
Borrowers after the date hereof (whether by loan, capital infusion or by other
means) to (ii) the aggregate Maximum Liability of all Guarantors hereunder
(including such Paying Guarantor) as of such date (without giving effect to any
right to receive, or obligation to make, any contribution hereunder), or to the
extent that a Maximum Liability has not been determined for any Guarantor, the
aggregate amount of all monies received by such Guarantors from the Borrowers
after the date hereof (whether by loan, capital infusion or by other means).
Nothing in this provision shall affect any Guarantor’s several liability for
the entire amount of the Guaranteed Obligations (up to such Guarantor’s Maximum
Liability). Each of the Guarantors covenants and agrees that its right to



115









 





receive any contribution under this Guaranty from a Non-Paying Guarantor shall
be subordinate and junior in right of payment to the payment in full in cash of
the Guaranteed Obligations. This provision is for the benefit of both the
Agent, the LC Issuer, the Lenders and the Guarantors and may be enforced by any
one, or more, or all of them in accordance with the terms hereof.



     15.12 Lending Installations. The Guaranteed Obligations may be booked at
any Lending Installation. All terms of this Guaranty apply to and may be
enforced by or on behalf of any Lending Installation.



     15.13 Liability Cumulative. The liability of each Loan Party as a
Guarantor under this Article XV is in addition to and shall be cumulative with
all liabilities of each Loan Party to the Agent, the LC Issuer and the Lenders
under this Agreement and the other Loan Documents to which such Loan Party is a
party or in respect of any obligations of liabilities of the other Loan
Parties, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary.



ARTICLE XVI




CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL




     16.1 CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING A
CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS WITHOUT REGARD TO THE CONFLICT OF LAWS
PROVISIONS) OF THE STATE OF TEXAS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE
TO NATIONAL BANKS.



     16.2 CONSENT TO JURISDICTION. EACH LOAN PARTY HEREBY IRREVOCABLY SUBMITS
TO THE NON-EXCLUSIVE JURISDICTION OF ANY U.S. FEDERAL OR TEXAS STATE COURT
SITTING IN DALLAS, TEXAS IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING
TO ANY LOAN DOCUMENTS AND EACH LOAN PARTY HEREBY IRREVOCABLY AGREES THAT ALL
CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN
ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER
HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN SUCH A
COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT
THE RIGHT OF THE AGENT, THE LC ISSUER OR ANY LENDER TO BRING PROCEEDINGS
AGAINST ANY LOAN PARTY IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL
PROCEEDING BY ANY LOAN PARTY AGAINST THE AGENT, THE LC ISSUER OR ANY LENDER
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTION WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A
COURT IN DALLAS, TEXAS.



116









 





     16.3 WAIVER OF JURY TRIAL. EACH LOAN PARTY, THE AGENT, THE LC ISSUER AND
EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR
OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN
DOCUMENT OR THE RELATIONSHIP ESTABLISHED THEREUNDER.



ARTICLE XVII




THE BORROWER REPRESENTATIVE




     17.1 Appointment; Nature of Relationship.
APC is hereby appointed by each of the Borrowers as its contractual
representative (herein referred to as the “Borrower Representative”) hereunder
and under each other Loan Document, and each of the Borrowers irrevocably
authorizes the Borrower Representative to act as the contractual representative
of such Borrower with the rights and duties expressly set forth herein and in
the other Loan Documents. The Borrower Representative agrees to act as such
contractual representative upon the express conditions contained in this
Article XVII. Additionally, the Borrowers hereby appoint the Borrower
Representative as their agent to receive all of the proceeds of the Loans in
the Funding Account. The Agent and the Lenders, and their respective officers,
directors, agents or employees, shall not be liable to the Borrower
Representative or any Borrower for any action taken or omitted to be taken by
the Borrower Representative or the Borrowers pursuant to this Section 17.1.



     17.2 Powers. The Borrower Representative shall have and may exercise such
powers under the Loan Documents as are specifically delegated to the Borrower
Representative by the terms of each thereof, together with such powers as are
reasonably incidental thereto. The Borrower Representative shall have no
implied duties to the Borrowers, or any obligation to the Lenders to take any
action thereunder except any action specifically provided by the Loan Documents
to be taken by the Borrower Representative.



     17.3 Employment of Agents. The Borrower Representative may execute any of
its duties as the Borrower Representative hereunder and under any other Loan
Document by or through Authorized Persons.



     17.4 Notices. Each Borrower shall promptly notify the Borrower
Representative of the occurrence of any Default or Unmatured Default hereunder
referring to this Agreement describing such Default or Unmatured Default and
stating that such notice is a “notice of default.” In the event that the
Borrower Representative receives such a notice, the Borrower Representative
shall give prompt notice thereof to the Agent and the Lenders. Any notice
provided to the Borrower Representative hereunder shall constitute notice to
each Borrower on the date received by the Borrower Representative.



     17.5 Successor Borrower Representative. Upon the prior written consent of
the Agent, the Borrower Representative may resign at any time, such resignation
to be effective upon the



117









 







appointment of a successor Borrower Representative.
The Agent shall give prompt written notice of such resignation to the Lenders.



     17.6 Execution of Loan Documents; Aggregate Borrowing Base Certificate.
The Borrowers hereby empower and authorize the Borrower Representative, on
behalf of the Borrowers, to execute and deliver to the Agent and the Lenders
the Loan Documents and all related agreements, certificates, documents, or
instruments as shall be necessary or
appropriate to effect the purposes of the Loan Documents, including
without limitation, the Aggregate Borrowing Base Certificates and the
Compliance Certificates. Each Borrower agrees that any action taken by the
Borrower Representative or the Borrowers in accordance with the terms of this
Agreement or the other Loan Documents, and the exercise by the Borrower
Representative of its powers set forth therein or herein, together with such
other powers that are reasonably incidental thereto, shall be binding upon all
of the Borrowers.



     17.7 Reporting. Each Borrower hereby agrees that such Borrower shall
furnish promptly after each Fiscal Month to the Borrower Representative a copy
of its Borrowing Base Certificate and any other certificate or report required
hereunder or requested by the Borrower Representative on which the Borrower
Representative shall rely to prepare the Aggregate Borrowing Base Certificates
and Compliance Certificates required pursuant to the provisions of this
Agreement.



[Signature Pages Follow]




118









 








     IN WITNESS WHEREOF, the Loan Parties, the Lenders, the LC Issuer and the
Agent have executed this Agreement as of the date first above written.



	 	 	 	 	 	 	 
	 	 	BORROWERS:
	 
	 	 	 	 	 	 
	 	 	ACTION PERFORMANCE COMPANIES, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	ACTION RACING COLLECTABLES, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	ACTION SPORTS IMAGE, L.L.C.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	FUNLINE MERCHANDISE COMPANY, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Executive Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	JEFF HAMILTON COLLECTION, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Secretary	 	 







 









 






	 	 	 	 	 	 	 
	 	 	MCARTHUR TOWEL AND SPORTS, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	RACING COLLECTABLES CLUB OF AMERICA, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	TREVCO TRADING CORP.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Secretary	 	 
	 
	 	 	 	 	 	 
	 	 	LOAN PARTIES:
	 
	 	 	 	 	 	 
	 	 	ACTION CORPORATE SERVICES, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	AW ACQUISITION CORP.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	CREATIVE MARKETING & PROMOTIONS, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Vice President	 	 







 









 






	 	 	 	 	 	 	 
	 	 	GORACING.COM, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Chief Financial Officer	 	 
	 
	 	 	 	 	 	 
	 	 	GORACING INTERACTIVE SERVICES, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	President	 	 
	 
	 	 	 	 	 	 
	 	 	RYP, INC.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	THE FAN CLUB COMPANY, L.L.C.
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ R. David Martin	 	 
	

	 	 	 	
 	 	 
	

	 	 	 	R. David Martin	 	 
	

	 	 	 	Vice President	 	 
	 
	 	 	 	 	 	 
	 	 	NOTICE ADDRESS FOR ALL BORROWERS AND LOAN PARTIES:
	 
	 	 	 	 	 	 
	 	 	c/o ACTION PERFORMANCE COMPANIES, INC.
	 
	 	 	 	 	 	 
	 	 	Address: 1480 S. Hohokam Drive

                  Tempe, AZ 85281
	 	 	Attention: R. David Martin
	 	 	Telephone: (602) 337-3700
	 	 	Facsimile: (602) 337-3780







 









 






	 	 	 	 	 	 	 
	 	 	with a copy to:
	 
	 	 	 	 	 	 
	 	 	Greenberg Traurig, LLP
	 	 	2375 East Camelback Road, Suite 700
	 	 	Phoenix, AZ 85016
	 	 	Attention: Jeffrey H. Verbin, Esq.
	 	 	Telephone: (602) 445-8202
	 	 	Facsimile: (602) 445-8630







 









 






	 	 	 	 	 	 	 
	 	 	AGENT AND LENDER:
	 
	 	 	 	 	 	 
	 	 	BANK ONE, NA
	 	 	Individually, as Agent and LC Issuer
	 
	 	 	 	 	 	 
	

	 	By:
	 	/s/ Gary N. Fowler	 	 
	

	 	 	 	
 	 	 
	

	 	Name:
	 	Gary N. Fowler	 	 
	

	 	Title:
	 	Director	 	 
	 
	 	 	 	 	 	 
	 	 	Address:
	 	 	Bank One, NA
	 	 	1717 Main Street, LL1
	 	 	Dallas, Texas 75201
	 	 	Attention: Andrea S. Friedheim
	 	 	Telephone: (214) 290-3357
	 	 	Facsimile:(214) 290-____